Sig Tarp Report 07 09

SIGTARP: Quarterly Report to Congress | July 21, 2009
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SIGTARP
SIG-QR-09-03
Q3
2009
SIGTARP Office of the Special Inspector General
for the Troubled Asset Relief Program
Advancing Economic Stability Through Transparency, Coordinated Oversight and Robust Enforcement
202.622.1419
Hotline: 877.SIG.2009 Quarterly Report to Congress
SIGTARP@do.treas.gov July 21, 2009
www.SIGTARP.gov
MISSION
SIGTARP’s mission is to advance economic stability by promoting the
efficiency and effectiveness of TARP management, through transparency,
through coordinated oversight, and through robust enforcement against
those, whether inside or outside of government, who waste, steal or abuse
TARP funds.
STATUTORY AUTHORITY
SIGTARP was established by Section 121 of the Emergency Economic
Stabilization Act of 2008 (EESA). Under EESA, the Special Inspector General
has the duty, among other things, to conduct, supervise and coordinate audits
and investigations of the purchase, management and sale of assets under the
Troubled Asset Relief Program (TARP). In carrying out those duties, SIGTARP
has the authority set forth in Section 6 of the Inspector General Act of 1978,
including the power to issue subpoenas.
Office of the Special Inspector General

General Telephone: 202.622.1419
Hotline: 877.SIG.2009
SIGTARP@do.treas.gov
www.SIGTARP.gov
CONTENTS
Executive Summary 1
TARP in Focus, and in Context 3
Oversight Activities of SIGTARP 5
SIGTARP’s Recommendations on the Operations of TARP 7
Report Organization 10
Section 1
THE OFFICE OF THE SPECIAL INSPECTOR GENERAL FOR THE
TROUBLED ASSET RELIEF PROGRAM 11
SIGTARP’s Creation and Statutory Authority 13
SIGTARP’s Oversight Activities Since the April Quarterly Report 15
Building SIGTARP’s Organization 25
Section 2
TARP OVERVIEW 29
Financial Overview of TARP 31
Financial Institution Support Programs 45
Asset Support Programs 72
Automotive Industry Support Programs 93
TARP Tutorial: Bankruptcy 97
Homeowner Support Programs 114
Executive Compensation 118
Section 3
TARP IN CONTEXT: FINANCIAL INSTITUTION SUPPORT
AND POLICIES OUTSIDE OF TARP 127
TARP Tutorial: The Federal Reserve System 130
TARP in Context: Other Government Programs to Assist the
Financial Sector 137
Section 4
TARP OPERATIONS AND ADMINISTRATION 159
TARP Administrative and Program Expenditures 161
Current Contractors and Financial Agents 162
Conflicts of Interest 167
Section 5
SIGTARP RECOMMENDATIONS 169
Recommendations Relating to the Public-Private Investment Program 171
Continued Use of Ratings Agencies in TALF 184
Requiring Recipients to Account for Use of TARP Funds 186
Tracking the Implementation of Recommendations in Previous Reports 187
Endnotes 193
APPENDICES
A. Glossary* –
B. Acronyms and Abbreviations* –
C. Reporting Requirements 198
D. Transaction Detail 202
E. Public Announcement of Audits* –
F. Key Oversight Reports and Testimonies* –
G. Correspondence Regarding SIGTARP Recommendations 222
H. Organizational Chart 257
*Visit www.sigtarp.gov to view Appendix A: Glossary, Appendix B: Acronyms and Abbreviations,

Appendix E: Public Announcement of Audits, Appendix F: Key Oversight Reports and Testimo-
nies, and for further reference material.
INVESTIGATIONS
EXECUTIVE SUMMARY
QUARTERLY REPORT TO CONGRESS I JULY 21, 2009 3
EXECUTIVE SUMMARY
In the nine months since the Emergency Economic Stabilization Act of 2008
(“EESA”) authorized creation of the Troubled Asset Relief Program (“TARP”), the
U.S. Department of the Treasury (“Treasury”) has created 12 separate programs
involving Government and private funds of up to almost $3 trillion. From pro-
grams involving large capital infusions into hundreds of banks and other financial
institutions, to a mortgage modification program designed to modify millions of
mortgages, to public-private partnerships using tens of billions of taxpayer dol-
lars to purchase “toxic” assets from banks, TARP has evolved into a program of
unprecedented scope, scale, and complexity. Moreover, TARP does not function
in a vacuum but is rather part of the broader Government efforts to stabilize the
financial system, an effort that includes dozens of inter-related programs operated
by multiple Federal agencies. Thus, before the American people and their repre-
sentatives in Congress can meaningfully evaluate the effectiveness of TARP, not
only must the TARP programs themselves be understood, but also TARP’s scope
and scale must be placed into proper context with the other Government programs
designed to support the financial system. That is one of the ambitious goals of this
report.
In this report, the Office of the Special Inspector General for the Troubled
Asset Relief Program (“SIGTARP”) endeavors to (i) explain the various TARP
programs and how Treasury has used those programs through June 30, 2009, (ii)
provide a brief explanation of the numerous other Government programs that have
been implemented by Treasury and other Federal agencies to support the financial
and mortgage markets; (iii) describe what SIGTARP has done to oversee the vari-
ous TARP programs since its April Quarterly Report to Congress, dated April 21,
2009 (the “April Quarterly Report”), and (iv) set forth a series of recommendations
for the operation of TARP.
TARP IN FOCUS, AND IN CONTEXT

TARP, as originally envisioned in the fall of 2008, would have involved the pur-
chase, management, and sale of up to $700 billion of “toxic” assets, primarily
troubled mortgages and mortgage-backed securities (“MBS”). That framework was
soon shelved, however, and TARP funds are being used, or have been announced
to be used, in connection with 12 separate programs that, as set forth in Table 1
on the next page, involve a total (including TARP funds, loans and guarantees from
other agencies, and private money) that could reach nearly $3 trillion. Through
June 30, 2009, Treasury has announced the parameters of how $643.1 billion of
the $700 billion would be spent through the 12 programs. Of the $643.1 billion
that Treasury has committed, $441 billion has actually been spent.
As massive and as important as TARP is on its own, it is just one part of a much
broader Federal Government effort to stabilize and support the financial system.
Since the onset of the financial crisis in 2007, the Federal Government, through
4 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM
many agencies, has implemented dozens of programs that are broadly designed to
support the economy and financial system. As detailed in Section 3 of this report,
the total potential Federal Government support could reach up to $23.7 trillion.
Any assessment of the effectiveness or the cost of TARP should be made in the
context of these broader efforts. Section 3 also provides a tutorial on the Federal
Reserve System, which administers many of the non-TARP credit and liquidity
facilities that are providing support to the financial system.
TABLE 1
TOTAL POTENTIAL FUNDS SUBJECT TO SIGTARP OVERSIGHT, AS OF 6/30/2009 ($ BILLIONS)
Total Projected Projected TARP

Program Brief Description or Participant Funding at Risk ($) Funding ($)
Capital Purchase Program (“CPP”) Investments in 649 banks to date; 8 institutions $218.0 $218.0
total $134 billion; received $70.1 billion in capital ($70.1) ($70.1)
repayments
Automotive Industry Financing Program GM, Chrysler, GMAC, Chrysler Financial; received 79.3 79.3
(“AIFP”) $130.8 million in loan repayments (Chrysler
Financial)
Auto Supplier Support Program (“ASSP”) Government-backed protection for auto parts 5.0 5.0
suppliers
Auto Warranty Commitment Program Government-backed protection for warranties of 0.6 0.6
(“AWCP”) cars sold during the GM and Chrysler bankruptcy
restructuring periods
Unlocking Credit for Small Businesses Purchase of securities backed by SBA loans 15.0 15.0
(“UCSB”)
Systemically Significant Failing Institutions AIG investment 69.8 69.8
(“SSFI”)
Targeted Investment Program (“TIP”) Citigroup, Bank of America investments 40.0 40.0
Asset Guarantee Program (“AGP”) Citigroup, ring-fence asset guarantee 301.0 5.0
Term Asset-Backed Securities Loan Facility FRBNY non-recourse loans for purchase of asset- 1,000.0 80.0
(“TALF”) backed securities
Making Home Affordable (“MHA”) Program Modification of mortgage loans 75.0 50.0
Public-Private Investment Program (“PPIP”) Disposition of legacy assets; Legacy Loans 500.0 – 1,000.0 75.0
Program, Legacy Securities Program
(expansion of TALF)
Capital Assistance Program (“CAP”) Capital to qualified financial institutions; includes TBD TBD
stress test
New Programs, or Funds Remaining for Potential additional funding related to CAP; other 131.4 131.4
Existing Programs programs
Total $2,365.0 – $2,865.0 $699.0
Note: See Table 2.1 in Section 2 for notes and sources related to the information contained in this table.
OVERSIGHT ACTIVITIES OF SIGTARP
Since the April Quarterly Report, SIGTARP has been actively engaged in fulfill-
ing its vital investigative and audit functions as well as in building its staff and
organization.
SIGTARP’s Investigations Division has developed rapidly and is quickly be-
coming a sophisticated white-collar investigative agency. Through June 30, 2009,
SIGTARP has 35 ongoing criminal and civil investigations. These investigations
include complex issues concerning suspected accounting fraud, securities fraud,
insider trading, mortgage servicer misconduct, mortgage fraud, public corruption,
false statements, and tax investigations. Two of SIGTARP’s investigations have
recently become public:
• Federal Felony Charges Against Gordon Grigg: On April 23, 2009, Federal
felony charges were filed against Gordon B. Grigg in the U.S. District Court for
the Middle District of Tennessee, charging him with four counts of mail fraud
and four counts of wire fraud. The charges are based on Grigg’s role in embez-
zling approximately $11 million in client investment funds that he garnered
through false claims, including that he had invested $5 million in pooled client
funds toward the purchase of the TARP-guaranteed debt. Grigg pleaded guilty
to all charges and is scheduled for sentencing on August 6, 2009.
• FTC Action Against Misleading Use of “MakingHomeAffordable.gov”: On
May 15, 2009, based upon an action brought by the Federal Trade Commission
(“FTC”), a Federal district court issued an order to stop an Internet-based opera-
tion that pretended to operate “MakingHomeAffordable.gov,” the official website
of the Federal Making Home Affordable program. According to the FTC’s com-
plaint, the defendants purchased sponsored links as advertising on the results
pages of Internet search engines, and, when consumers searched for “making
home affordable” or similar search terms, the defendants’ ads prominently and
conspicuously displayed “MakingHomeAffordable.gov.” Consumers who clicked
on this link were not directed to the official website, but were diverted to sites
that solicit applicants for paid loan modification services. The operators of these
websites either purport to offer loan modification services themselves or sold
the victims’ personally identifying information to others. SIGTARP is providing
assistance to FTC during the investigation.
More than 50% of SIGTARP’s ongoing investigations were developed in whole

or in part through tips or leads provided on SIGTARP’s Hotline (877-SIG-2009
or accessible at www.SIGTARP.gov). Over the past quarter, the SIGTARP Hotline
received and analyzed more than 3,200 tips, running the gamut from expressions of
concern over the economy to serious allegations of fraud.
SIGTARP remains committed to being proactive in dealing with potential fraud
in TARP. For example, the previously announced TALF Task Force, which was
organized by SIGTARP to get out in front of any efforts to profit criminally from
the Term Asset-Backed Securities Loan Facility (“TALF”), has been expanded to
cover the Public-Private Investment Program (“PPIP”). In addition to SIGTARP,
the TALF-PPIP Task Force consists of the Inspector General of the Board of
Governors of the Federal Reserve System, the Federal Bureau of Investigation,
Treasury’s Financial Crimes Enforcement Network, U.S. Immigration and Customs
Enforcement, the Internal Revenue Service Criminal Investigation Division, the
Securities and Exchange Commission, and the U.S. Postal Inspection Service.
On the audit side, SIGTARP is in the process of completing its first round of
audits. SIGTARP will be issuing, at about the time of this report, its first formal
audit report concerning how recipients of Capital Purchase Program (“CPP”) funds
reported their use of such funds. In February 2009, SIGTARP sent survey letters to
more than 360 financial and other institutions that had completed TARP funding
agreements through January 2009. Although most banks reported they did not seg-
regate or track TARP fund usage on a dollar-for-dollar basis, most banks were able
to provide insights into their actual or planned future use of TARP funds. For some
respondents the infusion of TARP funds helped to avoid a “managed” reduction of
their activities; others reported that their lending activities would have come to a
standstill without TARP funds; and others explained that they used TARP funds to
acquire other institutions, invest in securities, pay off debts, or that they retained
the funds to serve as a cushion against future losses. Many survey responses also
highlighted the importance of the TARP funds to the bank’s capital base, and
by extension, the impact of the funds on lending. In light of the audit findings,
SIGTARP renews its recommendation that the Secretary of the Treasury require all
TARP recipients to submit periodic reports to Treasury on their use of TARP funds.
SIGTARP also has audits nearing completion examining the following issues:
executive compensation restriction compliance, controls over external influences
on the CPP application process, selection of the first nine participants for funds
under CPP (with a particular emphasis on Bank of America), AIG bonuses, and
AIG counterparty payments. In addition, SIGTARP is undertaking a series of new
audits, as follows:
• CPP Warrant Valuation and Disposition Process: The audit will seek to
determine (i) the extent to which financial institutions have repaid Treasury’s
investment under CPP and the extent to which the warrants associated with that
process were repurchased or sold; and (ii) what process and procedures Treasury
has established to ensure the Government receives fair market value for the war-
rants and the extent to which Treasury follows a clear, consistent, and objective
process in reaching decisions where differing valuations of warrants exist. This
audit complements a July 10, 2009, report by the Congressional Oversight Panel
examining the warrant valuation process.
• Follow-up Assessment of Use of Funds by TARP Recipients: This audit will
examine use of funds by recipients receiving extraordinary assistance under the
Systemically Significant Failing Institutions program, the Automotive Industry

Financing Program, as well as insurance companies receiving assistance under
CPP.
• Governance Issues Where U.S. Holds Large Ownership Interests: The audit,
being conducted at the request of Senator Max Baucus, will examine governance
issues when the U.S. Government has obtained a large ownership interest in a
particular institution, including: (i) What is the extent of Government involve-
ment in management of companies in which it has made sizeable investments,
including direction and control over such elements as governance, compensa-
tion, spending, and other corporate decision making? (ii) To what extent are
effective risk management, internal controls, and monitoring in place to protect
and balance the Government’s interests and corporate needs? (iii) Are there per-
formance measures in place that can be used to track progress against long-term
goals and timeframes affecting the Government’s ability to wind down its invest-
ments and disengage from these companies? (iv) Is there adequate transparency
to support decision making and to provide full disclosure to the Congress and the
public?
• Status of the Government’s Asset Guarantee Program with Citigroup: The
audit examining the Government’s Asset Guarantee Program (“AGP”) with
Citigroup, based upon a request by Representative Alan Grayson, will address a
series of questions about the Government’s guarantee of certain Citigroup assets
through the AGP such as: (i) How was the program for Citigroup developed? (ii)
What are the current cash flows from the affected assets? and (iii) What are the
potential for losses to Treasury, the Federal Deposit Insurance Corporation, and
the Federal Reserve under the program?
• Making Home Affordable Mortgage Modification Program: This audit will
examine the Making Home Affordable mortgage modification program to assess
the status of the program, the effectiveness of outreach efforts, capabilities of
loan servicers to provide services to eligible recipients, and challenges confront-
ing the program as it goes forward.
SIGTARP’S RECOMMENDATIONS ON THE OPERATION OF TARP

One of SIGTARP’s oversight responsibilities is to provide recommendations to
Treasury so that TARP programs can be designed or modified to facilitate effective
oversight and transparency and to prevent fraud, waste, and abuse. In Section 5 of
this report, SIGTARP details ongoing recommendations concerning PPIP, TALF,
and tracking use of funds and provides an update on the implementation of recom-
mendations made in previous reports. Two categories of recommendation are worth
highlighting at the outset:
Transparency in TARP Programs

Although Treasury has taken some steps towards improving transparency in TARP
programs, it has repeatedly failed to adopt recommendations that SIGTARP
believes are essential to providing basic transparency and fulfill Treasury’s stated
commitment to implement TARP “with the highest degree of accountability and
transparency possible.” With one new recommendation made in this report, there
are at least four such unadopted recommendations:
• Use of Funds Generally: One of SIGTARP’s first recommendations was

that Treasury require all TARP recipients to report on the actual use of TARP
funds. Other than in a few agreements (with Citigroup, Bank of America, and
AIG), Treasury has declined to adopt this recommendation, calling any such
reporting “meaningless” in light of the inherent fungibility of money. SIGTARP
continues to believe that banks can provide meaningful information about
what they are doing with TARP funds — in particular what activities they
would not have been able to do but for the infusion of TARP funds. That belief
has been supported by SIGTARP’s first audit, in which nearly all banks were
able to provide such information.
• Valuation of the TARP Portfolio: SIGTARP has recommended that Treasury
begin reporting on the values of its TARP portfolio so that taxpayers can get
regular updates on the financial performance of their TARP investments.
Notwithstanding that Treasury has now retained asset managers and is receiv-
ing such valuation data on a monthly basis, Treasury has not committed to
providing such information except on the statutorily required annual basis.
• Disclosure of TALF Borrowers Upon Surrender of Collateral: In TALF,
the loans are non-recourse, that is, the lender (Federal Reserve Bank of New
York) will have no recourse against the borrower beyond taking possession of
the posted collateral (consisting of asset-backed securities (“ABS”)). Under the
program, should such a collateral surrender occur, TARP funds will be used
to purchase the surrendered collateral. In light of this use of TARP funds,
SIGTARP has recommended that Treasury and the Federal Reserve disclose
the identity of any TALF borrowers that fail to repay the TALF loan and must
surrender the ABS collateral.
• Regular Disclosure of PPIF Activity, Holdings, and Valuation: In the PPIP
Legacy Securities Program, the taxpayer will be providing a substantial portion
of the funds (contributing both equity and lending) that will be used to pur-
chase toxic assets in the Public-Private Investment Funds (“PPIFs”). SIGTARP
is recommending that all trading activity, holdings, and valuations of assets of
the PPIFs be disclosed on a timely basis. Not only should this disclosure be re-
quired as a matter of basic transparency in light of the billions of taxpayer dol-
lars at stake, but such disclosure would also serve well one of Treasury’s stated
reasons for the program in the first instance: the promotion of “price discovery”
in the illiquid market for MBS. Treasury has indicated that it will not require
such disclosure.
Although SIGTARP understands Treasury’s need to balance the public’s trans-

parency interests, on one hand, with the interests of the participants and the desire
to have wide participation in the programs, on the other, Treasury’s default position
should always be to require more disclosure rather than less and to provide the
investors in TARP — the American taxpayers — as much information about what
is being done with their money as possible. Unfortunately, in rejecting SIGTARP’s
basic transparency recommendations, TARP has become a program in which
taxpayers (i) are not being told what most of the TARP recipients are doing with
their money, (ii) have still not been told how much their substantial investments are
worth, and (iii) will not be told the full details of how their money is being invested.
In SIGTARP’s view, the very credibility of TARP (and thus in large measure its
chance of success) depends on whether Treasury will commit, in deed as in word,
to operate TARP with the highest degree of transparency possible.
Imposition of Information Barriers, or “Walls,” in PPIP

In the April Quarterly Report, SIGTARP noted that conflicts of interest and col-
lusion vulnerabilities were inherent in the design of PPIP stemming from the fact
that the PPIF managers will have significant power to set prices in a largely illiquid
market. These vulnerabilities could result in PPIF managers having an incentive
to overpay significantly for assets or otherwise using the valuable, proprietary PPIF
trading information to benefit not the PPIF, but rather the manager’s non-PPIF
business interests. As a result, SIGTARP made a series of recommendations in the
April Quarterly Report, including that Treasury should impose strict conflicts of
interest rules.
Since the April Quarterly Report, Treasury has worked with SIGTARP to address
the vulnerabilities in PPIP, and SIGTARP made a series of specific recommenda-
tions, suggestions, and comments concerning the design of the program. Treasury
adopted many of SIGTARP’s suggestions and has developed numerous provisions
that make PPIP far better from a compliance and anti-fraud standpoint than when
the program was initially announced.
However, Treasury has declined to adopt one of SIGTARP’s most fundamental
recommendations — that Treasury should require imposition of an informational
barrier or “wall” between the PPIF fund managers making investment decisions on
behalf of the PPIF and those employees of the fund management company who
manage non-PPIF funds. Treasury has decided not to impose such a wall in this
instance, despite the fact that such walls have been imposed upon asset manag-
ers in similar contexts in other Government bailout-related programs, including by
Treasury itself in other TARP-related activities, and despite the fact that three of
the nine PPIF managers already must abide by similar walls in their work for those
other programs.
If nothing else, the reputational risk that Treasury and the program could face
if a PPIF manager should generate massive profits in its non-PPIF funds as a result
of an unfair advantage, even if that advantage is not strictly against the rules, justi-
fies the imposition of a wall. Failure to impose a wall, on the other hand, will leave
Treasury vulnerable to an accusation that has already been leveled against it — that
Treasury is using TARP to pick winners and losers and that, by granting certain firms
the PPIF manager status, it is benefitting a chosen few at the expense of the dozens
of firms that were rejected, of the market as a whole, and of the American taxpayer.
This reputational risk is not one that can be readily measured in dollars and cents,
but is rather a risk that could put in jeopardy the fragile trust the American people
have in TARP and, by extension, their Government.
In addition to these recommendations, SIGTARP also makes additional recom-
mendations, described in more detail in Section 5, concerning other aspects of PPIP
and concerning the use of ratings agencies in TALF.
REPORT ORGANIZATION
The report is organized as follows:
• Section 1 describes the activities of SIGTARP.

• Section 2 describes how Treasury has spent TARP funds thus far and contains
an explanation or update of each program, both implemented and recently
announced.
• Section 3 places TARP in the context of the broader bailout efforts by sum-
marizing multiple other Government programs that support the financial system
and the economy.
• Section 4 describes the operations and administration of the Office of Financial
Stability (“OFS”), the office within Treasury that manages TARP.
• Section 5 lays out SIGTARP’s recommendations to Treasury with respect to the
operation of TARP.
• The report also includes numerous appendices containing, among other things,
figures and tables detailing all TARP investments through June 30, 2009.
The goal is to make this report a ready reference on what TARP is and how it
has been used to date. In the interest of making this report as understandable as
possible, and thereby furthering general transparency of the program itself, certain
technical terms are highlighted in the text and defined in the adjacent margin. In ad-
dition, portions of Sections 2 and 3 are devoted to tutorials explaining the financial
terms and concepts necessary to obtain a basic understanding of the programs’
operations.
THE OFFICE OF THE SPECIAL
SECTION 1
INVESTIGATIONS
INSPECTOR GENERAL FOR THE
TROUBLED ASSET RELIEF PROGRAM
SIGTARP’S CREATION AND STATUTORY AUTHORITY

Emergency Economic Stabilization Act
The Office of the Special Inspector General for the Troubled Asset Relief
Program (“SIGTARP”) was created by Section 121 of the Emergency Economic
Stabilization Act of 2008 (“EESA”). Under EESA, SIGTARP has the responsibility,
among other things, to conduct, supervise, and coordinate audits and investiga-
tions of the purchase, management, and sale of assets under the Troubled Asset
Relief Program (“TARP”). SIGTARP is required to report quarterly to Congress to
describe SIGTARP’s activities and to provide certain information about TARP over
that preceding quarter. EESA gives SIGTARP the authorities listed in Section 6 of
the Inspector General Act of 1978, including the power to obtain documents and
other information from Federal agencies and to subpoena reports, documents, and
other information from persons or entities outside of Government. EESA provided
SIGTARP with an initial allocation of $50 million to fund its operations.
The Special Inspector General, Neil M. Barofsky, was confirmed by the Senate
on December 8, 2008, and sworn into office on December 15, 2008.
SIGTARP Act
On April 24, 2009, the President signed into law the Special Inspector General for
the Troubled Asset Relief Program Act of 2009 (the “SIGTARP Act” or the “Act”),
which amends EESA as follows:
• provides SIGTARP the authority, with limited exceptions, to conduct, supervise,

and coordinate audits and investigations into any actions taken under EESA
• makes clear that SIGTARP can undertake law enforcement functions without
first obtaining Attorney General approval
• gives SIGTARP the responsibility to coordinate and cooperate with other in-
spectors general on oversight of TARP-related activities
• clarifies that SIGTARP’s quarterly reports are due 30 days after the end of a fis-
cal quarter
• provides SIGTARP with the ability to hire up to 25 Federal retirees, without off-
set of their pension, and, for six months, the authority to hire Federal employees
under 5 U.S.C. § 3161, which gives employees a right to return to their original
agencies once SIGTARP no longer exists
• requires the Treasury Secretary to take steps to address deficiencies identified by
SIGTARP or certify to Congress that no action is necessary or appropriate
• mandates that SIGTARP shall provide a report to Congress, by September 1,
2009, on how TARP recipients have used TARP funds
• releases SIGTARP’s $50 million allocation for immediate use
SIGTARP believes that the Act makes clear that it has the authorities it needs
to fulfill its mission and will significantly improve its ability to attract and hire expe-
rienced Government auditors and investigators.
Ensign-Boxer Amendment
On May 20, 2009, the President signed into law the Helping Families Save Their
Homes Act of 2009, Public Law No. 111-22. Section 402 of this legislation (the
“Ensign-Boxer Amendment”) is named after two of its co-sponsors, Senators John
Ensign and Barbara Boxer. The Ensign-Boxer Amendment, consistent with recom-
mendations made in SIGTARP’s Quarterly Report to Congress, dated April 21,
2009 (the “April Quarterly Report”), requires the U.S. Department of the Treasury
(“Treasury”), in implementing its Public-Private Investment Program (“PPIP”), to:
• impose, in consultation with SIGTARP, strict conflicts-of-interest rules on

Public-Private Investment Fund (“PPIF”) managers to ensure arm’s-length
transactions, compliance with fiduciary duties, and full disclosure of relevant
facts and financial interests
• require PPIF managers to file quarterly reports, disclosing the 10 largest posi-
tions of the fund
• provide for SIGTARP access to PPIF manager books and records
• compel PPIF managers to retain all of their books and records
• require PPIF managers to acknowledge, in writing, that they owe fiduciary du-
ties to the public and private investors in the fund
• provide that PPIF managers must develop robust ethics policies and ensure
compliance with the same
• compel PPIF managers to develop and implement strict investor screening
procedures
• require PPIF managers periodically to identify each investor that directly or
indirectly owns 10% or more of the fund
• consult with SIGTARP and issue regulations governing the interaction of PPIP
with the Term Asset-Backed Securities Loan Facility (“TALF”) and other similar
public-private investment programs
As discussed later in this section and in detail in Section 5 of this report,

SIGTARP has, consistent with this statute, engaged in a series of discussions with
Treasury concerning the design of PPIP. For more detail on PPIP operations,
see the “Public-Private Investment Program” discussion in Section 2: “TARP
Overview.”
The Ensign-Boxer Amendment also made available to SIGTARP an additional
$15 million, but directed that SIGTARP, in expending such funds, prioritize per-
formance audits and investigations of recipients of non-recourse loans made under
any program that is funded by EESA. SIGTARP believes that the Ensign-Boxer
Amendment will assist SIGTARP to fulfill its mission under EESA and that it will
substantially improve the controls of PPIP and make it less susceptible to fraud,
waste, and abuse.
Fraud Enforcement Recovery Act

Also on May 20, 2009, the President signed into law the Fraud Enforcement
Recovery Act of 2009, Public Law No. 111-21 (“FERA”). Section 2(d) of FERA
amends 18 U.S.C. § 1031, entitled “Major Fraud Against the United States,” by
clarifying that any fraud related to efforts to obtain Federal financial assistance or Fraud Enforcement Recovery Act of
economic stimulus made available pursuant to EESA invokes the application of 2009, Public Law No. 111-21 (“FERA”):
criminal remedies under that section. SIGTARP believes that section 2(d) of FERA A law enacted to expand the Depart-
will thus enhance deterrence and assist in the prosecution of persons who are ment of Justice’s authority to prose-
inclined or attempt to defraud the programs implemented under EESA. cute crimes related to mortgage fraud,
commodities fraud, and fraud associat-
ed with Government assistance related
SIGTARP’S OVERSIGHT ACTIVITIES SINCE THE to the economic crisis.
APRIL QUARTERLY REPORT
SIGTARP has continued to fulfill its oversight role in multiple parallel tracks: from
making recommendations relating to preventing fraud and abuse prospectively; to
auditing aspects of TARP both inside and outside of Government; to investigating
allegations of fraud, waste, and abuse in TARP programs; to coordinating closely
with other oversight bodies; all the while trying to promote transparency in TARP
programs.
Providing Advice on Compliance and Fraud Prevention

To further its goal of improving prospectively the compliance and fraud prevention
aspects of TARP programs, SIGTARP has attempted to establish and maintain
regular lines of communications with the personnel primarily responsible for run-
ning TARP, including those working within Treasury’s Office of Financial Stability
(“OFS”) and within other agencies who manage TARP-related programs or activi-
ties, including the bank regulators, the Federal Reserve Board, and the Federal
Reserve Bank of New York (“FRBNY”), as follows:
• SIGTARP personnel generally receive briefings concerning each new TARP

initiative and new developments in implemented programs when necessary.
• The Special Inspector General and Deputy Special Inspector General typically
meet weekly with the head of OFS, OFS’s Chief Compliance Officer, and OFS’s
General Counsel to discuss ongoing issues and new developments.
• SIGTARP has established regular communication with officials from the
Federal Reserve System (staff from the Federal Reserve Board of Governors and
FRBNY) in connection with the Federal Reserve TARP-related programs.
Generally, Treasury and the other agencies have been cooperative in making
their personnel available to SIGTARP and have responded to SIGTARP’s requests
for documents and information.
SIGTARP has endeavored, to the extent it has had an opportunity, to examine
the planned framework for TARP initiatives before their terms are finalized and to
make recommendations designed to advance oversight and internal controls and
Mortgage-Backed Securities (“MBS”): prevent fraud, waste, and abuse within the programs. Since the April Quarterly
A pool of mortgages bundled together Report, SIGTARP has made such recommendations with regard to PPIP’s Legacy
by a financial institution and sold as
Securities Program, among others.
securities — a type of asset-backed
security.
Recommendations Regarding the Legacy Securities Program
As discussed more fully in Section 2 of this report, in PPIP’s Legacy Securities
Program, private fund managers will buy and manage portfolios of legacy mort-
gage-backed securities (“MBS”) with equity consisting of both private capital and
TARP funds. In the April Quarterly Report, SIGTARP identified several potential
vulnerabilities in the basic structure of PPIP and made a series of recommenda-
tions addressing such vulnerabilities in the areas, among others, of conflicts of
interest, collusion, money laundering, and how PPIP would interact with TALF.
Consistent with the Ensign-Boxer Amendment, SIGTARP and Treasury have
engaged in an active dialogue concerning the compliance and anti-fraud provisions
of the Legacy Securities Program. In light of those discussions, and after SIGTARP
consulted extensively with the Federal Reserve and FRBNY (which administers
several programs in which asset managers are retained in similar circumstances),
SIGTARP made a series of additional recommendations in two letters to Treasury.
As discussed in more detail in Section 5 of this report, Treasury has adopted many
of SIGTARP’s recommendations, making the program far better from a compli-
ance and fraud-prevention standpoint. However, Treasury has not adopted several
fundamentally important recommendations, including the need for an information
barrier, or “wall,” between those managing the PPIP funds and those managing
portfolios of similar assets at each fund management company.
SIGTARP Audit Activity

To fulfill SIGTARP’s mandate to promote the economy, efficiency, and effectiveness
of TARP programs and operations, SIGTARP’s Audit Division has identified several
aspects of TARP — some internal to Treasury and some external — that will be the
general focus of its work. SIGTARP’s audits generally will be designed to accom-
plish these objectives:
• ensure transparency in TARP programs to the fullest reasonable extent to foster

accountability in use of funds and program results
• examine whether Treasury managers have developed sufficient internal controls
and procedures to manage TARP programs and the vendors hired to assist in
such management
• ensure a fair, equitable, and consistent application and review process for indi-
viduals and entities seeking relief under the various TARP programs
• test compliance with the policies, procedures, regulations, terms, and conditions
that are imposed on TARP participants
• coordinate with other relevant audit and oversight entities to maximize audit
coverage while minimizing overlap and duplication of efforts
SIGTARP’s First Completed Audit: Use of Funds

SIGTARP’s first audit report, which is being released at or about the time of this re-
port, concerns how recipients of Capital Purchase Program (“CPP”) funds reported
their use of such funds. In February 2009, SIGTARP sent survey letters to more
than 360 financial and other institutions that had completed TARP funding agree-
ments through January 2009. In response to those surveys, although most banks
reported that they did not segregate or track TARP fund usage on a dollar-for-dollar
basis, they were able to provide insights into their actual or planned future use of
TARP funds. Over 98% of survey recipients reported their actual uses of TARP
funds. Highlights of the audit include:
• More than 80% of respondents cited the use of funds for lending; some reported
how it helped them avoid reduced lending. Many banks reported that lending
would have been lower without TARP funds or would have come to a standstill.
• More than 40% of respondents reported that they used some TARP funds to
help maintain the capital cushions and reserves required by their banking regu-
lators to be able to absorb unanticipated losses.
• Nearly a third of the respondents reported that they used some TARP funds to
invest in MBS, such as those backed by Ginnie Mae, Fannie Mae, and Freddie
Mac. These actions provided immediate support of the lending and borrowing
activities of other banks and positioned the banks for increased lending later.
• A smaller number reported using some TARP funds to repay outstanding loans
— some because the TARP funds were a more cost-effective source of funds
than their outstanding debt and some because of pressure from a creditor to use
the funds for that purpose.
• Several banks reported using some TARP funds to buy other banks. One re-
ported that this was a cost-effective way to acquire additional deposits that, in
turn, would facilitate an even greater amount of lending.
• Some banks reported that they had not yet allocated funds for lending and other
activities due to the short time elapsed since the receipt of funds, the weak
demand for credit, and the uncertain economic environment.
As discussed further in Section 5 of this report, in light of the audit findings,
SIGTARP renews its recommendation that the Secretary of the Treasury (“Treasury
Secretary”) require all CPP recipients to submit periodic reports to Treasury on
their use of TARP funds, including reports on their lending, investments, acquisi-
tions, and other activities that were supported by or resulted from their receipt of
TARP funds, as well as a description of what actions they were able to take as a
result of TARP funding.
Audits Nearing Completion

Several additional audits are nearing completion, and SIGTARP plans to issue
reports on the following audits over the next quarter:
• Executive Compensation Compliance: This audit, also based on SIGTARP’s

survey of TARP recipients, examines evolving executive compensation require-
ments during the first nine months of TARP and efforts of CPP recipients to
comply with the requirements as known at the time. This report is expected to
be issued in August 2009.
• External Influences: This audit examines whether, or to what extent, external
parties may have influenced decision making by Treasury or bank regulators in
approving bank applications for funding under CPP. This report is also expected
to be issued in August 2009.
• Funding of the First Nine TARP Recipients, with a Special Focus on
Bank of America: This audit examines the review and approval process associ-
ated with TARP assistance to the first nine CPP recipients, with emphasis on
additional assistance to Bank of America subsequently authorized under the
Targeted Investment and the Asset Guarantee Programs (“TIP” and “AGP”).
The audit also examines selected issues and interactions among Treasury,
Federal Reserve, and Bank of America officials in connection with Bank of
America’s acquisition of Merrill Lynch and the timing of Government assistance
under the latter two programs following the acquisition. This report is expected
to be issued in September 2009.
• Executive Compensation Oversight (AIG Bonuses): This audit examines
payouts of large bonus payments to American International Group (“AIG”)
employees in March 2009, including the extent of knowledge and oversight of

AIG compensation issues by Treasury and FRBNY in light of their respective
programs involving AIG. This report is expected to be issued in September 2009.
• AIG Counterparty Payments: This audit examines payments made to AIG
counterparties. AIG, which has received the largest amount of financial assis-
tance from the Government during the current financial crisis, reportedly made
counterparty payments at 100% of face value to other financial institutions,
including some foreign institutions and other financial institutions that had
received financial assistance under TARP. Questions exist whether any efforts
were made to negotiate any reduction in those payments. This report is expected
to be issued in September 2009.
New Audits Underway or Planned

SIGTARP has a number of recently announced audits and several others are
planned. Recently announced audits include:
• CPP Warrant Valuation and Disposition Process: This audit seeks to deter-
mine (i) the extent to which financial institutions have repaid Treasury’s invest-
ment under CPP and the extent to which the warrants associated with that
process were repurchased or sold; and (ii) what process and procedures Treasury
has established to ensure that the Government receives fair market value for
the warrants, and the extent to which Treasury follows a clear, consistent, and
objective process in reaching decisions where differing valuations of warrants
exist. This audit complements a Congressional Oversight Panel (“COP”) report
released on July 10, 2009, that examines the warrant valuation process.
• Follow-up Assessments of Use of Funds by TARP Recipients: This audit fol-
lows up on SIGTARP’s earlier use of funds audit. It focuses on use of funds by
recipients receiving extraordinary assistance under the Systemically Significant
Failing Institutions (“SSFI”) program, the Automotive Industry Financing
Program (“AIFP”), as well as insurance companies receiving assistance under
CPP. This review seeks to provide a more complete picture of use of funds
across a broader category of recipients to meet a Congressional mandate for a
SIGTARP report on use of funds by TARP recipients.
• Governance Issues Where U.S. Holds Large Ownership Interests:
SIGTARP recently received a request from Senator Max Baucus, Chairman
of the Senate Committee on Finance, to undertake a body of work examin-
ing the following issues: (i) What is the extent of Government involvement in
management of companies in which it has made sizeable investments, including
direction and control over such elements as governance, compensation, spend-
ing, and other corporate decision making? (ii) To what extent are effective risk
management, internal controls, and monitoring in place to protect and balance
the Government’s interests and corporate needs? (iii) Are there performance
measures in place that can be used to track progress against long-term goals
and timeframes affecting the Government’s ability to wind down its investments
and disengage from these companies? (iv) Is there adequate transparency to
support decision making and to provide full disclosure to Congress and the
public? SIGTARP is currently engaged in discussions and planning with the
Government Accountability Office (“GAO”) directed toward a potential joint or
complementary effort in addressing this request.
• Status of the Government’s Asset Guarantee Program with Citigroup: This
review, recently requested by Representative Alan Grayson, addresses a series of
questions about the Government’s guarantee of certain Citigroup assets through
the AGP such as: (i) How was the program for Citigroup developed? (ii) What
are the current cash flows from the affected assets? (iii) What is the potential
for losses to Treasury, the Federal Deposit Insurance Corporation (“FDIC”), and
the Federal Reserve under the program? SIGTARP expects to launch a review of
this program during this coming quarter.
• Making Home Affordable Mortgage Modification Program: According
to Treasury, approximately three to four million homeowners could benefit
from the Making Home Affordable (“MHA”) mortgage modification program.
SIGTARP plans to launch a broad review during this coming quarter to assess
the status of the program, the effectiveness of outreach efforts, capabilities of
loan servicers to provide services to eligible recipients, and challenges confront-
ing the program as it goes forward.
SIGTARP Investigations Activity

SIGTARP’s Investigations Division has developed rapidly and is quickly becoming a
sophisticated white-collar investigative agency. Through June 30, 2009, SIGTARP
has opened 37 and has 35 ongoing criminal and civil investigations. These investi-
gations include complex issues concerning suspected accounting fraud, securities
fraud, insider trading, mortgage servicer misconduct, mortgage fraud, public cor-
ruption, false statements, and tax investigations. Two of SIGTARP’s investigations
have recently become public.
Felony Charges Against Gordon Grigg

On April 23, 2009, Federal felony charges were brought against Gordon B. Grigg in
the U.S. District Court for the Middle District of Tennessee, charging Grigg with
four counts of mail fraud and four counts of wire fraud. The charges are based on
Grigg’s role in embezzling approximately $11 million in client investment funds.
Grigg pled guilty to all charges and is scheduled for sentencing on August 6, 2009.
According to public documents, Grigg solicited approximately 60 investors to
invest funds totaling approximately $11 million. Grigg never purchased securities
or managed accounts for clients who invested funds with him; instead, he used
the investor funds for his personal benefit and expenses and to disburse “ficti-
tious” earnings and return of deposits to clients who cashed out or closed their
accounts. As an inducement for clients to invest, Grigg promised that he would
generate and sustain high rates of annualized returns on investment, and, as part
of his solicitation, he falsely claimed that he had the ability to invest client funds
in Government-guaranteed commercial paper and bank debt as part of TARP.
SIGTARP investigators provided assistance in the case in coordination with the
United States Attorney’s Office for the Middle District of Tennessee, the Securities
and Exchange Commission (“SEC”), the Federal Bureau of Investigation (“FBI”),
the United States Postal Inspection Service (“USPIS”), the Tennessee Department
of Commerce and Insurance, and the Franklin, Tennessee, Police Department.
Supporting FTC’s Action Enjoining Improper Use of

“MakingHomeAffordable.gov”
On Friday, May 15, 2009, at the request of the Federal Trade Commission (“FTC”),
a Federal district court issued an order to stop an Internet-based operation that pre-
tended to operate “MakingHomeAffordable.gov,” the official website of the Federal
MHA program for mortgage loan assistance. The FTC alleged that the defendants
deceptively diverted consumers who searched online for the free Government-
assistance program to commercial websites that offer loan modification services for
a fee.
According to the FTC’s complaint, the defendants purchased sponsored links
for their advertising on the results pages of Internet search engines, including
yahoo.com, msn.com, altavista.com, and alltheweb.com. When consumers
searched for “making home affordable” or similar search terms, the defendants’ ads
prominently and conspicuously displayed the website address “makinghomeafford-
able.gov.” Consumers who clicked on this advertised hyperlink were not directed to
the official website for the MHA program, but rather were diverted to websites that
solicit applicants for paid loan modification services. These commercial websites,
which are not part of or affiliated with the U.S. Government, require consumers to
enter personally identifying and confidential financial information. The operators of
these websites either purport to offer loan modification services themselves or sell
the personally identifying information to others.
The FTC filed an emergency request for a temporary restraining order in the
U.S. District Court for the District of Columbia, Civil Case No. 1:09-cv-00894
(CKK). Judge Colleen Kollar-Kotelly entered a temporary restraining order, barring
the defendants from using the “MakingHomeAffordable.gov” hyperlink or repre-
senting that they are affiliated with the U.S. Government. The order also requires
the four search engine providers to identify those who paid them to place the
ads and to refuse to place paid ads that contain active hyperlinks that are labeled
“MakingHomeAffordable.gov” or any other domain name containing “.gov.”

SIGTARP is providing assistance and support to the FTC during the
investigation.
SIGTARP Hotline
One of SIGTARP’s primary investigative priorities is to operate the SIGTARP
Hotline and thus provide an interface with the American public to facilitate the re-
porting of concerns, allegations, information, and evidence of violations of criminal
and civil laws in connection with TARP. Over the past quarter alone, the SIGTARP
Hotline has received and analyzed more than 3,200 contacts on the Hotline. These
contacts run the gamut from expressions of concern over the economy to serious
allegations of fraud involving TARP, and more than half of SIGTARP’s investiga-
tions were generated in connection with Hotline tips. The SIGTARP Hotline is
capable of receiving information anonymously, and confidentiality can and will be
provided to the fullest extent possible. The American public can provide informa-
tion by telephone, mail, fax, or online. SIGTARP has established a Hotline con-
nection on its website at www.SIGTARP.gov. SIGTARP honors all whistleblower
protections.
TALF-PPIP Task Force

In a proactive initiative to get out in front of any efforts to profit criminally from
the up to $1 trillion TALF program, SIGTARP organized a multi-agency task force
to deter, detect, and investigate any instances of fraud or abuse in TALF. In con-
nection with the announcement of the Financial Stability Plan (“FSP”), Treasury
announced the outlines of PPIP to deal with the problems posed by “toxic” legacy
mortgages and MBS. The PPIFs set up through PPIP will be able to use TALF to
obtain Federal Reserve financing to purchase such assets. Because of the expected
use of TALF by PPIP and the significant subject-matter overlap, SIGTARP and its
partners have expanded the TALF Task Force to also address the law enforcement
challenges posed by PPIP.
The TALF-PPIP Task Force, comprising both civil and criminal law enforce-
ment agencies, with both investigative and analytical resources, demonstrates
that the agencies involved are meeting that challenge proactively and before the
bulk of the money has been expended. In addition to SIGTARP, the TALF-PPIP
Task Force consists of the Inspector General of the Board of Governors of the
Federal Reserve System, FBI, Treasury’s Financial Crimes Enforcement Network
(“FinCEN”), U.S. Immigration and Customs Enforcement (“ICE”), Internal
Revenue Service Criminal Investigation Division (“IRS-CI”), SEC, and the USPIS.
The members of the TALF-PPIP Task Force combine their shared expertise in
securities fraud investigations and maximize their resources to deter potential
criminals, to identify and stop fraud schemes before they can fully develop, and to
bring to justice those who seek to commit fraud through TALF or PPIP. Although
participants of these programs who play by the rules have nothing to fear from this
Task Force, Federal law enforcement is ready now to detect, investigate, and bring
to justice any who would try to steal from these important programs.
Representatives from each agency participate in regular briefings about TALF
and PPIP, collectively identify areas of fraud vulnerability, engage in the training of
agents and analysts with respect to the complex issues surrounding the program,
and serve as points of contact within each agency for leads relating to TALF and
any resulting cases that are generated. The TALF-PPIP Task Force has already
received substantive briefings from FRBNY, Treasury, and SEC and has further
training sessions scheduled.
The TALF-PPIP Task Force represents a historic law enforcement effort
with an ambitious goal: to redefine the policing of complex Federal Government
programs by proactively arranging a coordinated law enforcement response before
fraud occurs.
Coordination with Law Enforcement Agencies

As part of its coordination role, SIGTARP has been active in forging partnerships
with other criminal and civil law enforcement agencies. These relationships are de-
signed to benefit both investigations originated by other agencies, when SIGTARP
expertise can be brought to bear, and SIGTARP’s own investigations, which can be
improved by tapping into additional resources. In this regard:
• SIGTARP has continued to develop close working relationships with the FBI,
IRS-CI, USPIS, ICE, SEC, and the FTC, both with each agency’s headquarters
and various field offices.
• SIGTARP has brought on a full-time detailee from the FBI’s Washington Field
Office (“WFO”) to work on SIGTARP investigations and to serve as a liaison
with the FBI-WFO.
• The Special Inspector General and Deputy Special Inspector General recently
met with SEC’s new Chief of the Enforcement Division and SIGTARP has
several ongoing investigations with SEC.
• SIGTARP is in the process of bringing on board a detailee from SEC to assist in
SIGTARP investigations and to serve as a liaison with SEC.
• SIGTARP has continued to develop relationships with the Department of
Justice (“DOJ”), both at Main Justice and with U.S. Attorney’s Offices across
the country, concerning both criminal and civil enforcement, and is currently
working with various DOJ components on many of its open investigations. The
Special Inspector General recently gave the keynote address at DOJ/FDIC’s an-
nual conference on bank fraud.
• SIGTARP continues to coordinate with more than a dozen States Attorneys

General.
• SIGTARP’s Deputy Special Inspector General for Investigations established
the Assistant Inspector General for Investigations (“AIGI”) TARP Interagency
Working Group. Its objective is to provide an active forum for heads of investiga-
tive divisions within the Inspector General (“IG”) community and other law en-
forcement agencies whose agency mission is in some way affiliated with TARP,
to coordinate and share relevant investigative information at the national level.
• SIGTARP continues to work closely with the New York High Intensity Financial
Crime Area (“NY HIFCA”). NY HIFCA provides SIGTARP with two dedicated
financial analysts, supervised by a Senior Special Agent from ICE, to provide da-
tabase search and analytical support, and the Special Inspector General recently
gave the keynote address at the NY HIFCA’s annual conference. This relation-
ship has already generated several complex ongoing investigations.
• SIGTARP obtains access to Bank Secrecy Act (31 U.S.C. § 5311 et seq.) data-
base services through FinCEN. SIGTARP is working with FinCEN to develop
an advisory regarding TARP programs that will be sent to thousands of financial
institutions, and SIGTARP’s Deputy Special Inspector General gave a presenta-
tion at FinCEN’s Bank Secrecy Act Working Group annual meeting.
Coordination with Other EESA Oversight Bodies

EESA, as amended, is explicit in mandating that SIGTARP coordinate audits and
investigations into TARP with the other primary oversight bodies: the Financial
Stability Oversight Board (“FSOB”), COP, and GAO. Numerous other agencies,
both in the IG community and among criminal and civil law enforcement agencies,
potentially have responsibilities that touch on TARP as well. SIGTARP takes seri-
ously its mandate to coordinate these overlapping oversight responsibilities, both to
ensure maximum coverage and to minimize duplicative requests of TARP manag-
ers. SIGTARP and its partners have continued to have significant success on this
front since the April Quarterly Report. These coordination efforts include:
• bi-weekly conference calls with staff from FSOB

• regular meetings with staff from COP and the launching of a complementary
effort to address Treasury’s repurchase of warrants from TARP recipients
• frequent interactions with GAO to coordinate ongoing and planned work to
avoid any unnecessary duplication of efforts and to better facilitate their indi-
vidual responsibilities
TARP-IG Council
Due to the scope of the various programs under TARP, numerous Federal agen-
cies have some role in administering or overseeing TARP programs. To further
facilitate SIGTARP’s coordination role, the Special Inspector General founded and
chairs the TARP Inspector General Council (“TARP-IG Council”), made up of
the Comptroller General and those IGs whose oversight functions are most likely
to touch on TARP issues. The Council meets monthly to discuss developments in
TARP and to coordinate overlapping audit and investigative issues. The TARP-IG
Council currently comprises:
• The Special Inspector General

• Inspector General of the Department of the Treasury
• Inspector General of the Board of Governors of the Federal Reserve System
• Inspector General of the Federal Deposit Insurance Corporation
• Inspector General of the Securities and Exchange Commission
• Inspector General of the Federal Housing Finance Agency
• Inspector General of the Department of Housing and Urban Development
• Treasury Inspector General for Tax Administration
• Inspector General for the Small Business Administration
• Comptroller General of the United States (head of GAO) or designee
Communications with Congress

One of SIGTARP’s primary functions is to ensure that Members of Congress are
kept informed of developments in TARP programs and SIGTARP’s oversight activi-
ties. To fulfill that role, the Special Inspector General and SIGTARP staff regularly
brief Members and staff. More formally, over the past quarter, the Special Inspector
General testified before the Joint Economic Committee (“JEC”) on April 23,
2009; entitled “Following the Money: A Quarterly Report by the Special Inspector
General for the TARP,” the testimony focused on the findings and recommenda-
tions of SIGTARP’s April Quarterly Report. Copies of all of the Special Inspector
General’s written testimony, hearing transcripts, and a variety of other materials
associated with Congressional hearings since SIGTARP’s inception are posted at
www.SIGTARP.gov/reports.
BUILDING SIGTARP’S ORGANIZATION

From the day that the Special Inspector General was confirmed by the Senate,
SIGTARP has worked to build its organization through various complementary
strategies, including hiring experienced senior executives who can play multiple
roles during the early stages of the organization, leveraging the resources of other
agencies, and, where appropriate and cost-effective, obtaining services through
SIGTARP’s authority to contract. Since the April Quarterly Report, SIGTARP has
continued to make substantial progress in building its operation.
Hiring
Each of SIGTARP’s divisions has continued the process of filling out its ranks. As
of June 30, 2009, SIGTARP had approximately 60 personnel, including detailees
from other agencies, with several new hires to begin over the coming weeks.
SIGTARP’s employees hail from many Federal agencies, including DOJ, FBI, IRS-
CI, Air Force Office of Special Investigations, GAO, Department of Transportation,
Department of Energy, SEC, DOJ, U.S. Secret Service, United States Postal
Service, U.S. Army Criminal Investigation Command, Naval Criminal Investigative
Service, Treasury-Office of the Inspector General, Department of Energy-Office
of the Inspector General, Department of Transportation-Office of the Inspector
General, Department of Homeland Security-Office of the Inspector General,
FDIC-Office of the Inspector General, Office of the Special Inspector General for
Iraq Reconstruction, and the Department of Housing and Urban Development
Office of the Inspector General. Hiring is actively ongoing, building to SIGTARP’s
current goal of approximately 160 full-time employees. The SIGTARP organiza-
tional chart, as of June 30, 2009, is included in Appendix H.
SIGTARP Budget
Section 121(j) of EESA provided $50 million in initial operating funds to
SIGTARP. When SIGTARP was established and its initial operating resources were
allocated, TARP was envisioned as a $700 billion asset-purchase and -guarantee
FIGURE 1.1
program. In the months that followed, however, TARP evolved into 12 separate
SIGTARP FY2010 PROPOSED BUDGET programs that have been estimated to involve up to approximately $3 trillion, sig-
$ Millions, % of $48.4 Million
nificantly expanding the necessary scope of SIGTARP’s oversight operations and re-
source needs. SIGTARP anticipates that its total budget for FY 2010 will be $48.4
Other $1.4 3% million, based on the assumption that it will reach its target of 160 staff by early
Transportation 2010. Approximately 50% of SIGTARP’s non-personnel costs will be payments
$3.1 6%
to other Government agencies for services provided. For a detailed breakdown of
Advisory
15% SIGTARP’s FY 2010 budget, see Figure 1.1.
$7.3
48% Personnel SIGTARP estimates that its initial operating funds will be expended by ap-
$23.2
proximately the second quarter of FY 2010 and that an additional $28.3 million
28%
Rent, Services
will be needed to fully fund operations through the fiscal year. Taking into account
$13.4 a portion of the $15 million in additional funds made available by the Ensign-Boxer
Amendment, which SIGTARP expects to spend over three years (i.e., $5 mil-
lion per year), SIGTARP has submitted a request to Treasury for a $23.3 million
amendment to the FY 2010 budget submission.
SIGTARP’s Physical and Technical Infrastructure

SIGTARP has begun the process of moving into office space at 1801 L Street, NW,
in Washington, D.C., the same office building in which the Treasury officials man-
aging TARP are located. SIGTARP is already occupying temporary quarters in that
building while its two permanent floors are being renovated. SIGTARP anticipates
occupying its permanent space by early 2010.
SIGTARP operates a website, www.SIGTARP.gov, on which it posts all of its re-
ports, testimony, audits, investigations (once such investigations are made public),
contracts, and more. The website prominently features SIGTARP’s Hotline, which
can also be accessed by phone at 877-SIG-2009 (877-744-2009).
From the website’s inception through June 30, 2009, more than 12 million visi-
tors have accessed SIGTARP’s website, and SIGTARP’s first two reports have been
downloaded more than 670,000 times.
SECT
CH ION TARP OVERVIEW
A P2T E R 3
This section summarizes the activities of the U.S. Department of the Treasury
(“Treasury”) in its management of the Troubled Asset Relief Program (“TARP”). It
includes a financial overview and provides updates on established TARP programs,
including the status of TARP executive compensation restrictions.
FINANCIAL OVERVIEW OF TARP

As of June 30, 2009, Treasury had announced commitments to spend $643.1
billion of the $700 billion authorized by Congress in the Emergency Economic
Stabilization Act of 2008 (“EESA”).1 Of this amount, approximately $441 billion
had been expended through nine implemented programs to provide support for
U.S. financial institutions, companies, and individual borrowers.2 On May 6, 2009,
Congress passed the Helping Families Save Their Home Act of 2009 (Public Law
No. 111-22),3 which amended EESA and reduced TARP’s authorized $700 billion
by $1.2 billion.4 Therefore, the Secretary of the Treasury (“Treasury Secretary”)
now “has the authority to purchase and hold up to roughly $699 billion in assets at
one time.”5
Treasury interprets the $699 billion maximum funding for TARP, as autho-
rized in EESA, as a cap on the amount that can be “outstanding” at any one time.
Therefore, as funds are repaid, they become available for other EESA-authorized
purposes.6 As of June 30, 2009, $70.3 billion7 in TARP funds had been repaid to
the Government. In total, 46.9% of TARP’s available $699 billion was outstanding.8
Any interest or dividends received from Treasury’s investments, as well as revenues
from the sale, exercise, or surrender of the warrants, are deposited into Treasury’s Warrant: The right, but not the obliga-
general fund for the reduction of public debt and are not available to be re-used by tion, to purchase a certain number of
Treasury.9 As of June 30, 2009, $6.9 billion in interest and dividends had been re- shares of common stock at a fixed
ceived by the Government, and $20.3 million in profits had been received from the price.
sale of warrants and preferred stock (received as a result of exercised warrants).10
The 12 announced programs within TARP can be categorized in 4 general
groups depending on the type of support they were designed to provide:
• Financial Institution Support Programs — These programs share a common,

stated goal of stabilizing the financial market to avoid disruption and provide for
a healthy economy.
• Asset Support Programs — These programs attempt to support asset values
and liquidity in the market by providing funding to purchase securities.
• Automotive Industry Support Programs — These programs all have a univer-
sal goal to stabilize the American automotive industry, promoting market stabil-
ity and a vigorous economy.
• Homeowner Support Programs — These programs encourage homeowner
affordability by providing loan modification and refinancing assistance.
Financial Institution Support Programs

The primary tool of TARP for assisting financial institutions thus far has been a
direct investment of capital. Financial institutions include bank holding companies
Systemically Significant: A financial and certain systemically significant institutions, such as American International
institution whose failure would impose Group, Inc. (“AIG”).
significant losses on creditors and
counterparties, call into question the • Capital Purchase Program (“CPP”). Treasury created CPP to provide funds to
financial strength of other similarly
“stabilize and strengthen the U.S. financial system by increasing the capital base
situated financial institutions, disrupt
of an array of healthy, viable institutions, enabling them [to] lend to consumers
financial markets, raise borrowing
and business[es].”11 As of June 30, 2009, Treasury had invested $203.2 bil-
costs for households and businesses,
and reduce household wealth.
lion in institutions through CPP out of a maximum projected funding total of
$218 billion under the program, of which $70.1 billion had been repaid.12 See
the “Capital Purchase Program” discussion in this section for more detailed
information.
• Capital Assistance Program (“CAP”). Similar to CPP, the goal of CAP is to
“ensure the continued ability of U.S. financial institutions to lend to creditwor-
thy borrowers in the face of a weaker than expected economic environment and
larger than expected potential losses.”13 As originally envisioned by Treasury,
CAP investments were to be targeted to financial institutions with more than
$100 billion in assets and would be sized to provide a capital buffer to be deter-
mined by a Supervisory Capital Assessment Program (“SCAP” or “stress test”).14
Treasury applied SCAP to 19 of the largest financial institutions and concluded
that 10 of those institutions will be required to seek additional capital.15 Those
failing to raise such capital in the private market will be required to take CAP
funds; however, many financial institutions have raised significant funds on
their own, which could seemingly limit their need for CAP. In addition to the
required participants, all qualifying financial institutions may apply under CAP
for additional capital without the stress-test requirement. As of June 30, 2009,
Preferred Stock: Equity ownership that no transactions had occurred under this program. See the “Capital Assistance
usually pays a fixed dividend, gives the Program” part of this section for a detailed discussion of the stress tests and
holder a claim on corporate earnings their results.
superior to common stock owners, and • Systemically Significant Failing Institutions (“SSFI”) Program. Under the
has no voting rights. Preferred stock stated terms of the SSFI program, Treasury invests in systemically significant
also has priority in the distribution of institutions to prevent their failure and the market disruption that would fol-
assets in the case of liquidation of a low.16 As of June 30, 2009, Treasury, through SSFI, had made, and is commit-
bankrupt company. ted to make investments in, one institution — AIG. This support was provided
through two transactions — $40 billion17 for the purchase of preferred stock
from AIG and approximately $29.8 billion for an equity capital facility that AIG
can draw on as needed.18 As of June 30, 2009, AIG had drawn down $1.15
billion in equity from the capital facility.19 See the “Systemically Significant
Failing Institutions” part of this section for a detailed discussion of the AIG
transactions.
• Targeted Investment Program (“TIP”). The stated objective of TIP is to
make targeted investments in financial institutions “to avoid significant market
disruptions resulting from the deterioration of one financial institution that can
threaten other financial institutions and impair broader financial markets and Senior Preferred Stock: Shares that
pose a threat to the overall economy.”20 As reported in SIGTARP’s Initial Report give the stockholder priority dividend
to Congress (“Initial Report”), dated February 6, 2009, Treasury purchased $20 and liquidation claims over junior pre-
ferred and common stockholders.
billion of senior preferred stock and received warrants of common stock from
both Citigroup and Bank of America, for a total expenditure of $40 billion in
TARP funds.21 As of June 30, 2009, Treasury had made no additional funding
available under this program. Subsequent to SIGTARP’s April Quarterly Report,
Citigroup finalized an exchange offering that will convert preferred stock,
including preferred shares acquired by Treasury through TIP/AGP and CPP,
to trust preferred shares and common stock, respectively. See the “Targeted
Investment Program and Asset Guarantee Program” portion of this section for a
detailed discussion of Citibank’s exchange offering.
• Asset Guarantee Program (“AGP”). Through AGP, Treasury’s stated goal is to
use insurance-like protections to help stabilize at-risk financial institutions. AGP
provides certain loss protections on a select pool of mortgage-related or similar Illiquid Assets: Assets that cannot be
assets held by participants whose portfolios of distressed or illiquid assets pose a quickly converted to cash.
risk to market confidence.22 As discussed in SIGTARP’s Initial Report, Treasury,
the Federal Deposit Insurance Corporation (“FDIC”), and the Federal Reserve
agreed to provide certain loss protections with respect to $301 billion in trou-
bled assets held by Citigroup.23 Treasury’s projected TARP investment through
this program accounted for $5 billion in protection for Citigroup as of June 30,
2009.24 A similar arrangement with Bank of America was announced on January
16, 2009; Bank of America, however, recently requested not to go forward with
the program. As of June 30, 2009, the matter had not yet been resolved.25 See
the “Targeted Investment Program and Asset Guarantee Program” discussion in
this section for more information on Citigroup’s transactions.
Asset Support Programs

The purpose of these programs is to support the liquidity and market value of as-
sets owned by financial institutions. These assets may include various classes of
asset-backed securities (“ABS”) and several types of loans. These programs seek
to bolster the balance sheets of the financial firms and help free up capital so that
financial institutions can extend more credit to support the U.S. economy.
• Term Asset-Backed Securities Loan Facility (“TALF”). TALF was originally

designed to increase the credit available for consumer and small-business loans
through a Federal Reserve loan program backed by TARP funds. TALF provides
Commercial Mortgage-Backed Securi-
non-recourse loans to investors secured by certain types of asset-backed securi-
ties (“CMBS”): A financial instrument
that is backed by a commercial real ties. Treasury and the Federal Reserve expanded TALF to cover additional asset
estate mortgage or a group of com- classes, including newly issued and legacy commercial mortgage-backed securi-
mercial real estate mortgages that are ties (“CMBS”) with the potential to expand into residential mortgage-backed
packaged together. securities (“RMBS”). TALF as originally announced was to be a $200 billion
program that included $20 billion of TARP funds to be used for purchasing
Residential Mortgage-Backed Securi- surrendered collateral.26 The facility can be expanded to $1 trillion of lending;
ties (“RMBS”): A financial instrument according to Treasury, it will provide up to $80 billion of TARP funds to sup-
that is backed by a group of residential port this program,27 but according to the Federal Reserve, the amount for which
real estate mortgages that are pack- Treasury would be responsible would be up to $100 billion.28 As of June 30,
aged together.
2009, the Federal Reserve Bank of New York (“FRBNY”) had facilitated four
TALF subscriptions of non-mortgage-related ABS, totaling approximately $28.5
Legacy Assets: Also commonly
billion of TALF borrowing.29 TALF had also launched a subscription for newly
referred to as troubled or toxic assets,
issued CMBS in June, for which no loans were issued. An overview of TALF,
legacy assets are real estate-related
loans and securities (legacy loans later in this section, provides more information on these activities.
and legacy securities) that remain on • Public-Private Investment Program (“PPIP”). As originally announced,
banks’ balance sheets that have lost Treasury, in coordination with FDIC and the Federal Reserve, intended PPIP
value but are difficult to price due to to improve the health of financial institutions and restart frozen credit markets
the recent market disruption. through the purchase of legacy assets (e.g., legacy loans, CMBS, RMBS).30 In
addition to the expansion of TALF to include legacy securities, as discussed
Legacy Loans: Loans that are often previously, PPIP was intended to involve investments made through multiple
underperforming real estate-related Public-Private Investment Funds (“PPIFs”) in two subprograms — one to pur-
loans held by a bank that it wishes chase real estate-related loans (“legacy loans”) and the other to purchase real
to sell, but recent market disruptions
estate-related securities (“legacy securities”) from financial institutions.
have made difficult to price.
However, as of June 30, 2009, the future of the legacy loans program is in
doubt because FDIC has shelved the program.31 The legacy securities program
Legacy Securities: Troubled real estate-
is under development, and Treasury announced the selection of nine PPIF
related securities (RMBS, CMBS), and
other asset-backed securities (“ABS”) managers on July 8, 2009, that will receive up to $30 billion in TARP funds.
lingering on institutions’ balance sheets Treasury has stated that PPIP, originally intended to involve up to $1 trillion in
because their value could not be funds, is expected to utilize up to $75 billion of TARP funds.32 See the “Public-
determined. Private Investment Program” discussion later in this section for details about the
program structure and fund manager terms.
Secondary Market: The secondary • Unlocking Credit for Small Businesses (“UCSB”). Under UCSB, Treasury
market, also known as the aftermarket, announced that it will begin purchasing up to $15 billion in securities backed
is the financial market where previously by Small Business Administration (“SBA”) loans.33 As demand has diminished
issued securities and financial instru- in the secondary market for these securities due to adverse credit conditions,
ments such as stocks, bonds, options,
there has been a reduction in the volume of new small-business loans written by
and futures are bought and sold.
banks. As of June 30, 2009, no transactions had occurred under this program.
See the discussion of “Unlocking Credit for Small Businesses” in this section for
more information on the program.
Automotive Industry Support Programs

The stated objective of TARP’s automotive industry support programs is to “prevent
a significant disruption of the American automotive industry, which would pose a
systemic risk to financial market stability and have a negative effect on the econo-
my of the United States.”34
• Automotive Industry Financing Program (“AIFP”). Under this program,

Treasury made emergency loans to Chrysler Holding LLC (“Chrysler”), Chrysler
Financial Services Americas LLC (“Chrysler Financial”), and General Motors
Corporation (“GM”). In addition to these investments, Treasury purchased
senior preferred stock from GMAC LLC (“GMAC”). Subsequent to SIGTARP’s
April Quarterly Report, the manufacturers (Chrysler and GM) were unable to
obtain necessary concessions from key stakeholders and, therefore, filed for
bankruptcy on April 30, 2009, and June 1, 2009, respectively. These bankrupt-
cies involved infusion of additional TARP funds. As of June 30, 2009, Treasury
had expended or committed $79.3 billion in AIFP investments, of which $130.8
million had been repaid.35 See the discussion of “Automotive Industry Financing
Program” later in this section for a detailed discussion on the reorganizations of
these companies.
• Auto Supplier Support Program (“ASSP”). The stated purpose of ASSP is to
provide Government-backed financing to break the adverse credit cycle affect-
ing the auto suppliers and the manufacturers by “providing suppliers with the
confidence they need to continue shipping their parts and the support they need
to help access loans to pay their employees and continue their operations.”36
Treasury’s commitment under this program was $5 billion as of June 30, 2009
— $3.5 billion for GM and $1.5 billion for Chrysler.37 See the discussion of
“Auto Supplier Support Program” in this section for more information.
• Auto Warranty Commitment Program (“AWCP”). The Auto Warranty
Commitment Program was designed by the Administration with the inten-
tion of bolstering consumer confidence in automobile warranties on GM- and
Chrysler-built vehicles. Under this program, Government-backed financing
was to be provided for the warranties of cars sold during the GM and Chrysler
restructuring periods. As of June 30, 2009, Treasury funded $640.7 million
toward this program — $360.6 million was made available to GM and $280.1
million was made available to Chrysler.38 However, Treasury has stated that the
funds are not expected to be used by the manufacturers. Treasury expects that
after GM and Chrysler fully emerge from bankruptcy, the committed funds will
be refunded to Treasury.39 See the discussion of “Auto Warranty Commitment
Program” in this section for more information.
Homeowner Support Programs

The homeowner support programs are aimed at assisting troubled homeowners and
financial institutions holding the affected assets.
• Making Home Affordable (“MHA”) Program. According to Treasury, MHA

is a foreclosure mitigation plan intended to “help bring relief to responsible
homeowners struggling to make their mortgage payments while preventing
neighborhoods and communities from suffering the negative spillover effects of
foreclosure, such as lower housing prices, increased crime, and higher taxes.”40
Treasury, along with other Federal agencies, “will undertake a comprehensive
multiple-part strategy,” which will provide for (i) a $75 billion loan modifica-
tion program for homeowners in default on their payments or facing imminent
default, (ii) a streamlined refinancing process for homeowners whose loans are
serviced by Fannie Mae or Freddie Mac, and (iii) approximately $200 billion
to support Fannie Mae and Freddie Mac.41 The funds for this effort will be
provided from both TARP- and non-TARP-related sources. Treasury announced
that up to $50 billion of TARP funds could be expended for this program.42 As
FIGURE 2.1 of June 30, 2009, $18 billion had been allocated to the program.43
TARP PROJECTED FUNDING,
BY PROGRAM The following figures and tables provide a status summary of the implemented
$ Billions, % of $699 Billion
and announced TARP and TARP-related initiatives:
UCSB 2% ASSP $5.0 1%
$15.0
AGP $5.0 1% • total potential funds subject to SIGTARP oversight (Table 2.1)
TIP $40.0
AWCP $0.6 <1% • projected TARP funding by program (Figure 2.1)
MHA $50.0 6% • expenditure levels by program as of June 30, 2009 (Table 2.2)
7% • cumulative expenditures and repayments as of June 30, 2009 (Figure 2.2)
CPP $218.0
21%
SSFI $69.8 10% ($70.1)a • cumulative expenditures over time for implemented programs (Figure 2.3)
• expenditures by program snapshot as of June 30, 2009 (Figure 2.4)
PPIP $75.0 11%
• summary of terms of TARP agreements (Table 2.3 and Table 2.4)
11% 19% • summary of largest warrant positions held by Treasury by program as of June 30,
AIFP $79.3b 11% New Programs, 2009 (Table 2.5)
or Remaining
TALF $80.0 Funds for Existing • summary of dividend and interest payments received by program (Table 2.6)
Programs $131.4
Implemented Programs
For a reporting of all purchases, obligations, expenditures, and revenues of
Announced Programs TARP, see Appendix C: “Cross-Reference to Reporting Requirements.”
Remaining Funds
Notes: Numbers affected by rounding. As of 6/30/2009, funding for

Capital Assistance Program (“CAP”) to be determined.
a
As of 6/30/2009, $70.1 billion of CPP funding had been repaid.
b
As of 6/30/2009, $130.8 million of principal payments related to
AIFP loans (Chrysler Financial) had been repaid.
Sources: See final endnote.

TABLE 2.1
TOTAL POTENTIAL FUNDS SUBJECT TO SIGTARP OVERSIGHT, AS OF 6/30/2009 ($ BILLIONS)
Total Projected Projected TARP

Program Brief Description or Participant Funding at Risk ($) Funding ($)
Capital Purchase Program (“CPP”) Investments in 649 banks to date; 8 institutions $218.0 $218.0
total $134 billion; received $70.1 billion in capital ($70.1) ($70.1)
repayments
Automotive Industry Financing Program GM, Chrysler, GMAC, Chrysler Financial; received 79.3 79.3
(“AIFP”) $130.8 million in loan repayments (Chrysler
Financial)
Auto Suppliers Support Program (“ASSP”) Government-backed protection for auto parts 5.0 5.0
suppliers
Auto Warranty Commitment Program Government-backed protection for warranties of 0.6 0.6
(“AWCP”) cars sold during the GM and Chrysler bankruptcy
restructuring periods
Unlocking Credit for Small Businesses Purchase of securities backed by SBA loans 15.0a 15.0
(“UCSB”)
Systemically Significant Failing Institutions AIG investment 69.8b 69.8b
(“SSFI”)
Targeted Investment Program (“TIP”) Citigroup, Bank of America investments 40.0 40.0
Asset Guarantee Program (“AGP”) Citigroup, ring-fence asset guarantee 301.0 5.0
Term Asset-Backed Securities Loan Facility FRBNY non-recourse loans for purchase of asset- 1,000.0 80.0
(“TALF”) backed securities
Making Home Affordable (“MHA”) Program Modification of mortgage loans 75.0c 50.0
Public-Private Investment Program (“PPIP”) Disposition of legacy assets; Legacy Loans 500.0 – 1,000.0 75.0
Program, Legacy Securities Program
(expansion of TALF)
Capital Assistance Program (“CAP”) Capital to qualified financial institutions; includes TBD TBD
stress test
New Programs, or Funds Remaining for Potential additional funding related to CAP; other 131.4 131.4
Existing Programs programs
Total $2,365.0 – $2,865.0 $699.0
Notes: Numbers affected by rounding.

a
Treasury announced that it would purchase up to $15 billion in securities under the Unlocking Credit for Small Businesses program.
b
Actual TARP expenditures as of 6/30/2009.
c
$75 billion is for mortgage modification.
Sources: Treasury, Office of Financial Stability, Chief of Compliance and CFO, SIGTARP interview, 3/30/2009; Treasury, Transactions Report, 7/2/2009, http://www.financialstability.gov/docs/
transaction-reports/transactions-report_070209.pdf, accessed 7/6/2009; Treasury, “Auto Supplier Support Program: Stabilizing the Auto Industry in a Time of Crisis,” 3/19/2009, http://www.
treas.gov/press/releases/docs/supplier_support_program_3_18.pdf, accessed 3/19/2009; Treasury, “Unlocking Credit for Small Businesses Fact Sheet,” 3/17/2009, http://www.financialsta-
bility.gov/roadtostability/unlockingCreditforSmallBusinesses.html, accessed 6/10/2009; Treasury, “Treasury, Federal Reserve, and FDIC Provide Assistance to Bank of America,” 1/16/2009,
http://www.treas.gov/press/releases/hp1356.htm, accessed 1/16/2009; Treasury Press Release, “U.S. Government Finalizes Terms of Citi Guarantee Announced in November,” 1/16/2009,
http://www.financialstability.gov/latest/hp1358.html, accessed 6/8/2009; Treasury, “Financial Stability Plan Fact Sheet,” 2/10/2009, http://www.financialstability.gov/docs/fact-sheet.pdf,
accessed 6/8/2009; Treasury, “Making Home Affordable: Updated Detailed Program Description,” 3/4/2009, http://www.treas.gov/press/releases/reports/housing_fact_sheet.pdf, accessed
6/10/2009; Treasury, “Public-Private Investment Program,” 4/6/2009, http://www.financialstability.gov/roadtostability/publicprivatefund.html, accessed 6/9/2009.
TABLE 2.2
EXPENDITURE LEVELS BY PROGRAM, AS OF 6/30/2009 ($ BILLIONS)
Amount Percent (%) Section Reference

Authorized Under EESA $700.0
Released Immediately $250.0 35.8%
Released Under Presidential Certificate of Need 100.0 14.3%
Released Under Presidential Certificate of Need &
350.0 50.1%
Resolution to Disapprove Failed
Helping Families Save Their Homes Act of 2009 (1.2) (0.2)%
Total Released $698.8 100.0%
Less: Expenditures by Treasury Under TARPa
Capital Purchase Program (“CPP”):
Bank of Americab $25.0 3.6%
Citigroup 25.0 3.6%
JPMorganc 25.0 3.6% “Financial Institution Support
Wells Fargo 25.0 3.6% Programs”
Goldman Sachsc 10.0 1.4%
Morgan Stanley c 10.0 1.4%
Other Qualifying Financial Institutionsd 83.2 11.9%
CPP Total $203.2 29.1%
Systemically Significant Failing Institutions (“SSFI”)
“Financial Institution Support
Program:
Programs”
AIG $69.8 10.0%
SSFI Total $69.8 10.0%
Targeted Investment Program (“TIP”):
“Financial Institution Support
Bank of America $20.0 2.9%
Programs”
Citigroup 20.0 2.9%
TIP Total $40.0 5.8%
Asset Guarantee Program (“AGP”): “Financial Institution Support
Citigroupe $5.0 0.7% Programs”
AGP Total $5.0 0.7%
Term Asset-Backed Securities Loan Facility (“TALF”):
“Asset Support Programs”
TALF LLC $20.0 2.9%
TALF Total $20.0 2.9%
Automotive Industry Financing Program (“AIFP”):
GM $49.5 7.1%
“Automotive Industry Support
GMAC 13.4 1.9%
Programs”
Chrysler 14.9 2.1%
Chrysler Financialf 1.5 0.2%
AIFP Total $79.3 11.3%
Automotive Supplier Support Program (“ASSP”):
GM Suppliers Receivables LLCg $3.5 0.5%
Programs”
Chrysler Holding LLCg 1.5 0.2%
ASSP Total $5.0 0.7%
Automotive Warranty Commitment Program (“AWCP”):
GM $0.4 0.1%
Programs”
Chrysler 0.3 0.0%
AWCP Total $0.6 0.1%
Making Home Affordable (“MHA”):
Countrywide Home Loans Servicing LP $5.2 0.7%
Chase Home Finance 3.6 0.5%
Wells Fargo Bank, NA 2.4 0.3% “Homeowner Support Programs”
CitiMortgage 1.1 0.2%
GMAC Mortgage 1.0 0.1%
Other Financial Institutionsh 4.7 0.7%
MHA Total $18.0 2.5%
Subtotal - TARP Expenditures $441.0 63.1%
TARP Repaymentsi $(70.3) (10.0)%
Balance Remaining of Total Funds Made
Available as of 6/30/2009 $328.0 46.9%

a
From a budgetary perspective, what Treasury has committed to spend (e.g., signed agreements with TARP fund recipients).
b
Bank of America’s share is equal to two CPP investments totaling $25 billion, which is the sum of $15 billion received on 10/28/2008 and $10 billion received on 1/9/2009.
c
These institutions repaid their CPP funds pursuant to Title VII, Section 7001(g) of the American Recovery and Reinvestment Act of 2009.
d
Other Qualifying Financial Institutions (“QFIs”) include all QFIs that have received less than $10 billion through CPP.
e
Treasury committed $5 billion to Citigroup under AGP; however, this funding is conditional based on losses realized and may potentially never be expended. This amount is not an actual outlay of cash.
f
Treasury’s $1.5 billion loan to Chrysler Financial represents the maximum loan amount. This $1.5 billion has not been fully expended because the loan will be funded incrementally at $100 million per week.
g
Represents a special purpose vehicle (“SPV”) created by the manufacturer. Balance represents the maximum loan amount, which will be funded incrementally.
h
Other Financial Institutions that have received less than $1 billion through MHA.
i
As of 6/30/2009, CPP repayments total $70.1 billion and AIFP loan repayments (Chrysler Financial) total $130.8 million.
Sources:
Emergency Economic Stabilization Act, P.L. 110-343, 10/3/2008; Library of Congress, “A Joint Resolution Relating to the Disapproval of Obligations under the Emergency Economic Stabilization Act of
2008,” 1/15/2009, www.thomas.loc.gov, accessed 1/25/2009; Helping Families Save Their Homes Act of 2009, P.L. 111-22, 5/20/2009; Treasury, Transactions Report, 7/2/2009, http://www.financial-
stability.gov/docs/transaction-reports/transactions-report_070209.pdf, accessed 7/6/2009; Treasury, response to SIGTARP data call, 7/8/2009.
FIGURE 2.2 FIGURE 2.4
CUMULATIVE EXPENDITURE AND EXPENDITURES BY PROGRAM, SNAPSHOT

$ Billions, % of $441.0 Billion
REPAYMENTS, AS OF 6/30/2009
$ Billions
AGP $5.0 1%
ASSP $5.0 1%
MHA $18.0 4%
TALF $20.0 5%
$328.03 AWCP $0.6 0.1%
TIP $40.0
9%
$70.25
$698.76
46% CPP $203.2a
$440.98 SSFI $69.8 16%
18%
Total TARP TARP TARP TARP Balance
AIFP $79.3b
Released Expenditures Repayments Remaining
Note: Numbers affected by rounding. Notes: Numbers affected by rounding.

a
As of 6/30/2009, $70.1 billion of CPP funding had been repaid.
Sources: Treasury, Transactions Report, 7/2/2009; Treasury, response to SIGTARP data call, 7/8/2009. b
As of 6/30/2009, $130.8 million of principal payments related to AIFP
loans (Chrysler Financial) had been repaid.
Sources: Treasury, Transactions Report, 7/2/2009; Treasury, response to

SIGTARP data call, 7/8/2009.
FIGURE 2.3
EXPENDITURES, BY PROGRAM, CUMULATIVE, 10/2008 – 6/2009
$ Billions
500
$5.0 AGP
$18.0 MHA
$20.0 TALF
400
$40.0 TIP
$69.8 SSFI
300
a
$85.0 Auto
b
200 Programs
c
100 $203.2 CPP
0
0
10/31 11/30 12/31 1/31 2/28 3/31 4/30 5/31 6/30
2008 2009
AGP
MHA
TALF
TIP
SSFI
Auto Programs
CPP

a As of 6/30/2009, $130.8 million of principal payments related to AIFP loans (Chrysler Financial) had been repaid.
b Auto Programs include AIFP, ASSP, and AWCP.
c As of 6/30/2009, $70.1 billion of CPP funding had been repaid.
Sources: Treasury, Transactions Report, 7/2/2009; Treasury, response to SIGTARP data call, 7/8/2009.
TABLE 2.3
EQUITY AGREEMENTS
TARP Program Company Date of Agreement Cost Assigned Description of Investment
CPP – Public 282 QFIs 10/14/2008a and later $199.1 billion Senior Preferred Equity
Common Stock Purchase Warrants
b
CPP – Private 331 QFIs 11/17/2008 and later $3.8 billion Preferred Equity
Preferred Stock Purchase Warrants that are exercised

immediately
SSFI AIG 4/17/2009 $41.6 billionc Non-Cumulative Preferred Equity
SSFI AIG 4/17/2009 $29.8 billiond

Non-Cumulative Preferred Equity

TIP Citigroup 12/31/2008 $20.0 billione Trust Preferred Securities
Warrants
f
TIP Bank of America 1/16/2009 $20.0 billion Senior Preferred Equity
Warrants
AIFP GMAC LLC 12/29/2008 $5.0 billion Senior Preferred Membership Interests
immediately
AIFP GMAC LLC 5/21/2009 $7.5 billion Mandatorily Convertible Preferred Stock
immediately
AIFP GMAC LLC 5/29/2009 $0.9 billion Common Equity Interest

a
Announcement date of CPP Public Term Sheet.
b
Announcement date of CCP Private Term Sheet.
c
AIG exchanged Treasury’s $40 billion investment in Cumulative Preferred Stock (obtained on 11/25/2008) for Non-Cumulative Preferred Stock, effectively cancelling the original $40 billion investment.
d
The Equity Capital Facility was announced as a $30 billion commitment, but Treasury reduced this amount by the value of the AIGFP Retention Payment Amount of $165 million.
e
Citigroup exchanged its $20 billion Senior Preferred Equity (obtained on 12/31/2008) for Trust Preferred Securities.
f
Date as of Treasury’s 1/27/2009 Transactions Report. The Security Purchase Agreement has a date of 1/15/2009.
Investment Information Dividends Term of Agreement

1% - 3% of risk–weighted assets, not to exceed $25 billion for each QFI 5% for first 5 years, 9% thereafter Perpetual
15% of senior preferred amount — Up to 10 years
1% - 3% of risk–weighted assets, not to exceed $25 billion for each QFI 5% for first 5 years, 9% thereafter Perpetual
5% of preferred amount 9% Up to 10 years
$41.6 billion aggregate liquidation preference 10% Perpetual

2% of issued and outstanding common stock on investment date; $2.50 — Up to 10 years
exercise price
Up to $29.8 billion aggregate liquidation preference. As of 6/30/2009, the 10% Up to 5 years
aggregate liquidation preference was $1.15 billion.
150 common stock warrants outstanding; $0.00002 exercise price — Up to 10 years
$20 billion 8% Perpetual
10% of total preferred stock issued; $10.61 exercise price — Up to 10 years
10% of total preferred stock issued; $13.30 exercise price — Up to 10 years
5% of preferred amount 9% Up to 10 years
$7.5 billion 9% Perpetual

5% of preferred amount — Up to 10 years
This equity interest was obtained by exchanging a prior debt obligation with — Perpetual
General Motors. See “Debt Agreements” table for more information.
Sources: Treasury, Transactions Report, 7/2/2009; Treasury, “TARP Capital Purchase Program Agreement, Senior Preferred Stock and Warrants, Summary of Senior Preferred Terms,” 10/14/2008;
Treasury, “TARP Capital Purchase Program Agreement, (Non-Public QFIs, excluding S Corps and Mutual Organizations) Preferred Securities, Summary of Warrant Terms,” 11/17/2008; Treasury, “Securi-
ties Purchase Agreement dated as of November 25, 2008 between American International Group, Inc. and United States Department of Treasury,” 11/25/2008; Treasury, “TARP AIG SSFI Investment,
Senior Preferred Stock and Warrant, Summary of Senior Preferred Terms,” 11/25/2008; Treasury, “Securities Purchase Agreement dated as of January 15, 2009 between Citigroup, Inc. and United States
Department of Treasury,” 1/15/2009; Treasury, “Citigroup, Inc. Summary of Terms, Eligible Asset Guarantee,” 11/23/2008; “Securities Purchase Agreement dated as of January 15, 2009 between Bank of
America Corporation and United States Department of Treasury,” 1/15/2009; Treasury, “Bank of America Summary of Terms, Preferred Securities,” 1/16/2009; Treasury, “GMAC LLC Automotive Industry
Financing Program, Preferred Membership Interests, Summary of Preferred Terms,” 12/29/2008; Treasury, response to SIGTARP data call, 7/13/2009; Treasury, “Factsheet on Capital Purchase Program,”
3/17/2009.
TABLE 2.4
DEBT AGREEMENTS
TARP Date of Cost
Program Company Agreement Assigned Description of Investment
CPP – 36 QFIs 1/14/2009 a
$0.4 billion Senior Subordinated Securities
S-Corps
Senior Subordinated Security Warrants that are exercised immediately
AIFP General Motors 12/31/2008 $19.8 billionb Debt Obligation with Warrants and Additional Note
AIFP General Motors 1/16/2009 $0.9 billion Debt Obligation
AIFP Chrysler 1/2/2009c $4.8 billionb Debt Obligation with Additional Note
AIFP Chrysler Financial 1/16/2009 $1.5 billion Debt Obligation with Additional Note
AIFP Chrysler 5/1/2009 $3.8 billion Debt Obligation with Additional Note
AIFP Chrysler 5/27/2009 $6.6 billion Debt Obligation with Additional Note, Equity Interest
AIFP General Motors 6/3/2009, $30.1 billion Debt Obligation with Additional Note
amended
7/10/2009
ASSP GM Supplier 4/9/2009 $3.5 billion Debt Obligation with Additional Note
Receivables LLC
ASSP Chrysler 4/9/2009 $1.5 billion Debt Obligation with Additional Note
Receivables SPV LLC

a
Announcement date of CPP S-Corporation Term Sheet.
b
Amount includes AWCP commitments.
c
Date as of Treasury’s 1/27/2009 Transactions Report. The Security Purchase Agreement has a date of 12/31/2008.
Interest / Term of
Investment Information Dividends Agreement
Each QFI may issue Senior Securities with an aggregate principal amount of 7.7% for first 5 years; 13.8% thereafter 30 years
1% – 3% of its risk-weighted assets, but not to exceed $25 billion.
Treasury will receive warrants to purchase an amount equal to 5% of the 13.8% 10 years
Senior Securities purchased on the date of investment.
This loan was funded incrementally; $4 billion funded on 12/31/2008, $5.4 LIBOR + 3% 12/29/2011
billion funded on 1/21/2009, $4 billion funded on 2/17/2009. Subse-
quently, this loan was then amended; $2 billion on 4/22/2009 and $4 billion
on 5/20/2009. In addition, on 5/27/2009, $361 million was set aside in an
SPV for the AWCP.
This loan was exchanged for a portion of GM’s common equity interest in LIBOR + 3% 1/16/2012
GMAC LLC on 5/29/2009. See “Equity Agreements” table for more
information.
Loan of $4 billion; additional note of $267 million (6.67% of the maximum 3% or 8% (if the company is in default of its 1/2/2012
loan amount). Subsequently, this loan was then amended; $500 million on terms under the agreement) plus the greater
4/29/2009. In addition, on 4/29/2009, $280 million was set aside in an of (a) three-month LIBOR or (b) LIBOR floor
SPV for the AWCP. (2.0%)
Loan is funded incrementally at $100 million per week; additional note is LIBOR + 1% for first year 1/16/2014
$75 million (5% of total loan size), which vests 20% on closing and 20% on LIBOR + 1.5% for remaining years
each anniversary of closing.
Loan of $3 billion committed to Chrysler for its bankruptcy period. Subse- (i) the greater of (a) LIBOR for the related 9/30/2009, subject to
quently, this loan was amended; $757 million was added on 5/20/2009. interest period or (b) two percent (2%) plus (ii) certain conditions
Treasury funded $1.9 billion during bankruptcy period. The remaining three and five-tenths percent (3.5%)
amount will be de-obligated.
Commitment to New CarCo Acquisition LLC (renamed Chrysler Group LLC For $2 billion: (i) the Eurodollar Rate, plus (ii) For $5 billion note:
on or about 6/10/2009) of up to $6.642 billion. The total loan amount is (a) 5% or, on loans extended past the original 12/10/2011; provided
up to $7.142 billion including $500 million of debt assumed from Treasury’s maturity date, (b) 6.50%. For $5.142 billion that issuer may extend
1/2/2009 credit agreement with Chrysler Holding LLC. The debt obligations note: (i) the Eurodollar Rate plus 7.91% and maturity for up to
are secured by a first-priority lien on the assets of New CarCo Acquisition (ii) an additional $17 million in PIK interest per $400 million of principal
LLC (the company that purchased Chrysler LLC’s assets in a sale pursuant quarter. For other notes: Eurodollar Rate plus to 6/10/2017. For other
to Section 363 of the Bankruptcy Code). 7.91% notes: 6/10/2017
Original $30.1 billion funded. Amended loan documents provided that $986 LIBOR + 3% Originally 10/31/2009, re-
million of the original DIP loan was left for the old GM. vised to remain outstand-
ing during the pendency of
the liquidation
Original loan amount was $3.5 billion, but it was decreased permanently to (i) the greater of (a) LIBOR for the related 4/9/2010
$2.5 billion on 7/8/2009. interest period or (b) two percent (2%) plus (ii)
three and five-tenths percent (3.5%)
Original loan amount was $1.5 billion, but it was decreased permanently to (i) the greater of (a) LIBOR for the related 4/9/2010
$1 billion on 7/8/2009. interest period or (b) two percent (2%) plus (ii)
three and five-tenths percent (3.5%)
Sources: Treasury, “Loan and Security Agreement By and Between General Motors Corporation as Borrower and The United States
Department of Treasury as Lender Dated as of December 31, 2008,” 12/31/2008. Treasury, “General Motors Corporation, Indicative
Summary of Terms for Secured Term Loan Facility,” 12/19/08; Treasury, “General Motors Promissory Note,” 1/16/2009; Treasury,
“Loan and Security Agreement By and Between Chrysler Holding LLC as Borrower and The United States Department of Treasury as
Lender Dated as of December 31, 2008,” 12/31/2008; Treasury, “Chrysler, Indicative Summary of Terms for Secured Term Loan
Facility,” 12/19/2008; Treasury, “Chrysler LB Receivables Trust Automotive Industry Financing Program, Secured Term Loan, Summary
of Terms,” 1/16/2009; OFS, response to SIGTARP draft report, 1/30/2009; Treasury, Transactions Report, 6/30/2009; Treasury,
response to SIGTARP data call, 7/13/2009; Treasury, “Fact Sheet on Capital Purchase Program,” 3/17/2009; Treasury Press Release,
“Treasury Releases Capital Purchase Program Term,” 1/14/2009; Treasury, “TARP Capital Purchase Program (Subchapter S Corpora-
tion), Senior Securities, Summary of Terms,” 1/14/2009.
TABLE 2.5
LARGEST POSITIONS IN WARRANTS OUTSTANDING HELD BY TREASURY, BY PROGRAM, AS OF 6/30/2009

Amount “In
Stock Price Strike Price the Money”
as of Number of as Stated Stock Price In or Out or “Out of the
Transaction Transaction Warrants in the as of of the Money” as of
Participant Date Date Outstanding Agreements 6/30/2009 Money? 6/30/2009
Capital Purchase Program (“CPP”):
Citigroup 10/28/2008 $13.41 210,084,034 $17.85 $2.97 OUT $(14.88)
Bank of America 10/28/2008 23.02 73,075,674 30.79 13.20 OUT (17.59)
Wells Fargo 10/28/2008 34.46 110,261,688 34.01 24.26 OUT (9.75)
JPMorgan Chasea 10/28/2008 37.60 88,401,697 42.42 34.11 OUT (8.31)
Morgan Stanleya 10/28/2008 15.20 65,245,759 22.99 28.51 IN 5.52
Systemically Significant Failing
Institutions (“SSFI”) Program:
AIGb 11/25/2008 35.40 2,689,938 50.00 23.20 OUT (26.80)
AIGb 4/17/2009 32.40 150 0.00c 23.20 IN 23.20
Targeted Investment Program (“TIP”):
Citigroup 12/31/2008 6.71 188,501,414 10.61 2.97 OUT (7.64)
Automotive Industry Financing
Program (“AIFP”):
GM 12/31/2008 3.20 122,035,597 3.47 1.09 OUT (2.38)
Asset Guarantee Program (“AGP”):
Citigroup 1/16/2009 3.50 66,531,728 10.61 2.97 OUT (7.64)

a
These institutions repaid their CPP funds pursuant to Title VII, Section 7001(g) of the American Recovery and Reinvestment Act of 2009. Treasury still holds these warrants in its portfolio for these
institutions.
b
All warrant and stock data for AIG are based on the 6/30/2009 reverse stock split of 1 for 20.
c
$0.00002 strike price.
Sources: Treasury, Transactions Report, 7/2/2009; Treasury, response to SIGTARP data call, 7/8/2009; Capital IQ, Inc. (a division of Standard & Poor’s), www.capitaliq.com.
TABLE 2.6
DIVIDEND AND INTEREST PAYMENTS,

BY PROGRAM ($ MILLIONS)
Program Amount
CPP $5,254.7
SSFI —–
TIP 1,128.9
AGP 107.6
AIFPa 361.3
ASSP 0.7
Total $6,853.2
Notes: Numbers affected by rounding. Data as of 6/30/2009.

a Includes AWCP
Source: Treasury, response to SIGTARP data call, 7/8/2009.

FINANCIAL INSTITUTION SUPPORT PROGRAMS

Qualifying Financial Institutions
Treasury created five TARP programs that involve investment of capital or guaran-
(“QFIs”): Private and public U.S.-con-
tee of assets in return for equity in financial institutions. Two investment pro- trolled banks, savings associations,
grams, the Capital Purchase Program (“CPP”) and the Capital Assistance Program bank holding companies, certain
(“CAP”), are open to all qualifying financial institutions (“QFIs”). The other three savings and loan holding companies,
programs, the Systemically Significant Failing Institutions (“SSFI”) program, and mutual organizations.
Targeted Investment Program (“TIP”), and Asset Guarantee Program (“AGP”) are
made available on a case-by-case basis to specific institutions needing exceptional
assistance above that of CPP and CAP.
FIGURE 2.5
Capital Purchase Program
CPP EXPENDITURES, BY PARTICIPANT,
Treasury currently anticipates that $218 billion of CPP TARP funds will eventually
CUMULATIVEa
be invested in QFIs, which include private and public U.S.-controlled banks, sav- $ Billions, % of $203.2 Billion
ings associations, bank holding companies (“BHCs”) (including insurance compa-
nies organized as BHCs), certain savings and loan holding companies (“SLHCs”), Bank of America
$25.0
mutual banks, and mutual holding companies. According to Treasury, the intention
Other
of CPP is to invest in healthy, viable banks to promote financial stability, maintain Institutions
12.3% JPMorgan
Chase
confidence in the financial system, and permit institutions to continue meeting $83.2 40.9%
$25.0
12.3%
the credit needs of American consumers and businesses.44 For a summary of the
distribution of CPP funding by participant — not including any repayment — see 12.3%
Wells Fargo
Figure 2.5. $25.0
12.3%
4.9% Citigroup
Program Updates Morgan Stanley $25.0
CPP operations have remained similar to what has been outlined in SIGTARP’s $10.0
4.9%
Initial Report and April Quarterly Report; however, on April 7, 2009, Treasury Goldman Sachs
$10.0
announced an extension of the program to mutual holding companies,45 and, one
week later, it released a program term sheet for mutual banks.46 On May 13, 2009, Notes: Numbers affected by rounding. Data as of 6/30/2009.
Bank of America = Bank of America Corporation; JPMorgan Chase =
Treasury announced an expansion of CPP known as “CPP for Small Banks.” JPMorgan Chase & Co.; Wells Fargo = Wells Fargo and Company;
Citigroup = Citigroup Inc.; Goldman Sachs = The Goldman Sachs
Group, Inc.
a
$203.2 billion represents total CPP funds expended before any
CPP repayments. JPMorgan, Goldman Sachs, Morgan Stanley,
and some other institutions have repaid their TARP funds under
Bank Holding Company (“BHC”): A company Mutual Banks: Depository institutions that CPP.
that controls a bank. Typically, a company are owned by their depositors and do not
Source: Treasury, Transactions Report, 7/2/2009.
controls a bank through the ownership of have a holding company associated with
25% or more of its voting securities. them.
Savings and Loan Holding Company Mutual Holding Company: A bank or savings
(“SLHC”): A company (other than a BHC) and loan holding company that is part of a
that controls a savings association. mutual bank that is owned by depositors;
distributes income in proportion to the
amount of business that members do with
the company.
TABLE 2.7
For more information on the CPP KEY DATES AND DEADLINES FOR CPP APPLICATION PROCESS,
application process, refer to SIGTARP’s BY APPLICANT CATEGORY
Initial Report, Section 3: “TARP Announced Application Number of
Implementation and Administration.” Type Date Deadline Participants
Publicly Helda 10/14/2008 11/14/2008 282
Privately Heldb 11/17/2008 12/8/2008 331
“S” Corporationc 1/14/2009 2/13/2009 36
Mutual Organizationsd 4/7/2009 5/7/2009 —
Mutual Bankse 4/14/2009 5/14/2009 —
Small Banksf (< $500 million in assets) 5/13/2009 11/21/2009 10g
Notes: Private QFIs are those that are non-public QFIs, excluding S Corporations and mutual organizations.
a Treasury, “Treasury Announces TARP Capital Purchase Program Description,” 10/14/2008, www.treas.gov, accessed 1/22/2009.
b Treasury, “Process Related FAQs for Private Bank Capital Purchase Program,” no date, www.treas.gov, accessed 1/22/2009.
c Treasury, “S Corporation FAQs,” no date, www.treas.gov, accessed 1/22/2009.
d Treasury, “Process Related FAQs for the Capital Purchase Program, Mutual Holding Company FAQs,” 4/7/2009,
www.financialstability.gov, accessed 4/7/2009.

e Treasury, “Treasury Releases Capital Purchase Program Term Sheet for Mutual Banks,” 4/14/2009, www.financialstability.gov,
accessed 6/1/2009.
f Treasury, “Remarks by Secretary Geithner Before the Independent Community Bankers of America Annual Washington Policy Summit,”
5/13/2009, www.financialstability.gov, accessed 6/1/2009.

g This number includes publicly held institutions, privately held institutions, and “S” Corps.
In addition, on May 14, 2009, insurance companies that organized themselves

under the terms of a BHC and applied within the initial application window were
granted preliminary approval to participate in CPP.47 The application process for
these qualified financial institutions is the same as the process for the previously
funded QFIs. Key dates for each type of institution that has or may apply for CPP
funding are outlined in Table 2.7.
Unique term sheets provide CPP guidance for these three types of mutual hold-
ing companies:
• publicly traded, subsidiary holding companies

• privately held, mid-tier subsidiary holding companies
• top-tier, mutual holding companies that do not have subsidiary holding
companies
The terms for the publicly traded and privately held subsidiary holding com-
Senior Securities: A debt or equity panies are similar to those of public and private corporations receiving preferred
security that has a higher priority over shares and warrants currently under CPP.48
others. For its CPP investment in mutual banks and mutual holding companies, the
Government will receive senior securities that carry a value equal to and not less
Risk-Weighted Assets: The amount of than 1% of the recipient firm’s risk-weighted assets and not more than $25 billion
a bank’s total assets after applying an or 3% of the recipient firm’s risk-weighted assets. This is similar to the amount of
appropriate risk factor to each asset. preferred shares that are received by Treasury from participating public corpora-
tions. The senior securities have a maturity of 30 years and carry interest rates of
FIGURE 2.6
TRACKING CAPITAL PURCHASE PROGRAM INVESTMENTS ACROSS THE COUNTRY
$10 Billion or More

$1 Billion to $10 Billion
$100 Million to $1 Billion
$10 Million to $100 Million
Less than $10 Million
$0
Note: Banks in Montana and Vermont had not received any funds as of
6/30/2009.
Source: Treasury, “Local Impact of the Capital Purchase Program,”

6/30/2009, www.financialstability.gov, accessed 6/30/2009.
7.7% for the first five years and 13.8% for their remaining life. Due to the differing
TABLE 2.8
tax structures of mutual organizations, these interest rates approximate the eco-
nomics of the 5% and 9% dividends required for many other CPP participants, in- CPP ORIGINAL INVESTMENT
cluding the publicly held BHCs. Just as it does with a private company under CPP, SUMMARY
Treasury will receive warrants to purchase senior securities equal to 5% of the value Largest Capital Investment $25 Billion
of the CPP investment.49 Additionally, on May 13, 2009, the Treasury Secretary Smallest Capital Investment $301,000
announced that the CPP application window would be re-opened for banks with Average Capital Investment $312.1 Million
Median Capital Investment $11.8 Million
assets under $500 million until November 21, 2009.50 According to Treasury, it will
be using the repayments of some of the largest banks to fund this expansion, which Notes: Numbers affected by rounding. Data as of 6/30/2009.
These numbers are based on total Treasury CPP investment
will permit small banks to receive an amount up to 5% of their risk-weighted assets. since 10/28/2008. Bank of America Corporation and Sun-
Trust Banks, Inc., each received investments in two separate
These increases apply to all QFIs with assets under $500 million, including public transactions.
and private corporations, S corporations, and mutual institutions.51 Sources: Treasury, Transactions Report, 7/2/2009. Treasury,
response to SIGTARP draft report, 7/13/2009.
Status of CPP Funds

As of June 30, 2009, Treasury had purchased $203.2 billion in preferred stock TABLE 2.9
and subordinated debentures from 649 different QFIs in 48 states, the District of CPP ORIGINAL INVESTMENT
Columbia, and Puerto Rico. Closings for CPP purchases generally occur each week SIZE
on Friday, and information regarding the transactions are made publicly available $10 Billion or More 6
by the following Tuesday. For geographical distribution of all the QFIs that have $1 Billion to $10 Billion 19
received funding see Figure 2.6. For a full listing of CPP recipients, see Appendix $100 Million to $1 Billion 56
D: “Transaction Detail.” Less than $100 Million 568
Although the original eight largest investments accounted for $134.2 billion of Total 649
the program, CPP has also had many more modest investments: 301 of 649 recipi- Notes: Data as of 6/30/2009. These numbers are based on
total Treasury CPP investment since 10/28/2008. Bank of
ents received $10 million or less.52 Table 2.8 and Table 2.9 show the distribution of America Corporation and SunTrust Banks, Inc., each received
investments in two separate transactions.
the investments by size.
For more information on CPP repay-

Repayment of Funds
ment, see Section 2: “TARP Overview” in
According to the CPP contracts between Treasury and the institutions, banks
SIGTARP’s April Quarterly Report.
were not permitted to repay their CPP funds, subject to certain limitations, within
the first three years; however, this portion of the agreement was changed by the
enactment of the American Recovery and Reinvestment Act of 2009 (“ARRA”),
which required Treasury to permit financial institutions to repay the capital infu-
sions, subject to their consultation with the appropriate Federal Banking Agency
Federal Banking Agency (“FBA”): One of
four agencies:
(“FBA”).53
1) Comptroller of the Currency Institutions seeking to buy back their preferred shares, in essence repay their
2) Board of Governors of the Federal TARP funds, must meet the standards required by their respective banking supervi-
Reserve System sor. According to Treasury, FBA supervisors will determine if the interested CPP
3) Federal Deposit Insurance recipient has sufficient equity without the CPP funds, an ability to lend, and a
Corporation comprehensive internal capital-assessment process.54 On June 1, 2009, the Federal
4) Office of Thrift Supervision Reserve announced additional specific criteria that it will use to review any request
for repayment of CPP funds from the top 19 BHCs included in the Supervisory
Capital Assessment Program (“SCAP”) process:55
• fulfill its role as an intermediary to provide lending to creditworthy households

FIGURE 2.7
and businesses without TARP capital
• maintain levels of capital consistent with supervisory expectations
SNAPSHOT OF CPP FUNDS
OUTSTANDING AND REPAID, • serve as financial and managerial support to its subsidiaries
BY QUARTER • be able to access equity on the private markets
$ Billions • meet its obligations and lending without reliance on FDIC’s Temporary
$198.8 $203.2 Liquidity Guarantee Program (“TLGP”) (For more information on this program,
$177.5 see “TARP in Context — Other Government Programs to Assist the Financial
200 $0.4
$70.1
Sector,” in Section 3 of this report.)
$198.4
150 $177.5 • carry a capital level necessary to meet the more adverse economic scenarios
under the SCAP testing
$133.1
100
For further details on SCAP, refer to the “Capital Assistance Program” discus-
50
sion later in this section.
0 As of June 30, 2009, 32 banks had repurchased their shares from Treasury.
Q42008 Q12009 Q22009 Treasury has received $70.1 billion in principal and an additional $316.1 million
CPP Funds Outstanding at Quarter’s End in accrued and unpaid dividends.56 Figure 2.7 shows the amount of CPP funds
CPP Funds Repaid at Quarter’s End outstanding, adjusted for repayments. For details of share repurchases conducted
as of June 30, 2009, see Appendix D: “Transaction Detail.”
Note: Numbers affected by rounding.
Source: Treasury, Transactions Report, 7/2/2009. Repurchase of Warrants

To maximize the benefit to the taxpayer, EESA mandated that Treasury receive
warrants when it invests in troubled assets. The warrants for publicly traded institu-
tions provide Treasury the right to purchase shares of common stock, or, in the case
of non-publicly traded institutions, preferred stock or debt at a fixed price.57 Under

CPP, the warrants expire in 10 years. As of June 30, 2009, Treasury had not exer-
cised its right under the warrants to purchase common shares in any of the public
institutions but had done so for non-public institutions.58
With institutions beginning to repay their CPP funds, the U.S. Government has
clarified its treatment of warrant repurchases in various ways. Under the standard
CPP Securities Purchase Agreement (“SPA”) and ARRA, publicly traded TARP re-
cipients have the right to repurchase their warrants with proper notice to Treasury
at the fair market value. Non-public TARP recipients have the right to repurchase
the preferred shares and subordinated debt that Treasury took when it immediately
exercised the warrants at the time their CPP transactions closed.59 ARRA states
that, following the repayment of TARP funding, Treasury “shall liquidate warrants
associated with such assistance at the current market price.”60 On May 20, 2009,
Congress passed the Helping Families Save Their Homes Act of 2009 (Public Law
No. 111-22), which amended the ARRA provision requiring Treasury to liquidate
its warrants immediately upon TARP repayment. Specifically, the phrase “shall
liquidate” was changed to “may liquidate” — indicating that Treasury has discretion
in deciding when it should sell or exercise its warrants.61
On June 26, 2009, Treasury announced guidance for the warrant repurchase
process for publicly traded institutions. If an institution wishes to repurchase war-
rants from Treasury, it must first take the following steps:62
Step 1: Notification to Treasury with Determination of Fair Market Value

Any institution wishing to repurchase its warrants must notify Treasury within 15
days of repayment of TARP funds.63 According to the CPP SPA, the notification
must include the number of warrants to be repurchased and the determination of
fair market value from the board of directors. Moreover, the board of directors must
be acting in good faith with reliance on an “independent investment banking firm.”
The independent appraiser must be retained by the TARP recipient and approved
by Treasury.64
Step 2: Treasury Evaluates Repurchase Offer

According to the CPP SPA and the guidance announced by Treasury, Treasury will
have 10 days to evaluate the TARP recipient’s offer of fair market value as required
by ARRA.65 According to Treasury, it will be using three different valuation method-
ologies to determine market values of the warrants:66
• market-price approach – For those warrants listed on a securities exchange,

current market value is used. However, many of the warrants that Treasury
holds are not listed on a securities exchange. In these cases, Treasury will use
market prices of securities with similar characteristics to assess the market value
of the warrants. Securities with similar characteristics include traded warrants,
traded options, common equity, and securities listed by similar institutions. Treasury
has stated that it will be using 5-10 market participants, such as investment banks
and asset management firms, to provide quotes on the value of the warrants.
• financial models – Treasury stated that it will conduct valuations based on
well-known, common financial models, such as the binomial and Black-Scholes
models. The models use various known inputs as well as assumptions about the
volatility and dividends of the common stock of the institution to calculate the
value of the warrants. To measure the volatility and assumptions of the common
stock, Treasury will be using a 60-day trailing volatility for the past 10 years of
the common stock price.
• third-party valuation – Treasury will be using the three asset managers that it
has hired to manage TARP assets and other outside consultants to assess inde-
pendently the value of each institution’s warrants.
Step 3: Negotiation Period

Should Treasury reject the TARP recipient’s repurchase offer, the Chief Executive
Officer (“CEO”) of the TARP recipient and a representative of Treasury shall meet
to discuss Treasury’s objections to the valuation proposed by the TARP recipient
and attempt to reach an agreement.67 As of June 30, 2009, all of the warrant repur-
chases have occurred as a product of this negotiation period.68
Step 4: Appraisal Procedure

If, in 10 days, no price is agreed upon, either the institution or Treasury may invoke
the “Appraisal Procedure.” This involves Treasury and the TARP recipient each
choosing an independent appraiser to agree mutually upon the fair market value of
the warrants. If, after 30 days, the two appraisers are not able to agree upon a fair
market value, then a third independent appraiser will be chosen with the consent
of the first two appraisers.69 The third appraiser has 30 days to make a decision,
and, subject to limitations — such as if one of the three valuations is significantly
different from the other two — a composite valuation of the three appraisals is
used to establish the fair market value.70 Treasury and the institution will be bound
by this price determination, but Treasury has stated that if the recipient is not satis-
fied with this price, it may withdraw its notification to repurchase the warrants.71
Under the CPP SPA, the costs of conducting any appraisal procedure “shall be
borne by the Company.”72
Alternate Disposition of Warrants

If the institution and Treasury do not invoke the “Appraisal Procedure,” or if the
institution decides not to seek to repurchase its warrants, Treasury has various
options as to how it manages these investments over the 10-year exercisable period
— it may sell them, exercise them, or hold them as it sees fit to otherwise maximize
benefit to the taxpayers. When selling the warrants on the open market, Treasury
has stated that it will do so through an auction process. As of June 30, 2009, guid-
ance on this auction process has not yet been released.73 Treasury has stated that it
intends to liquidate the warrants of institutions that have redeemed their CPP pre-
ferred shares quickly.74 While under the SPA, Treasury also has the right to auction
50% of the warrants of financial institutions that have not yet repaid TARP funds;75
as of June 30, 2009, it had not done so.
As of June 30, 2009, 11 banks had repurchased their warrants for a total of
$18.7 million,76 while three private institutions whose warrants were immediately
exercised into preferred shares had repurchased those shares for a total of
$1.6 million.77 For a list of institutions, both public and private, that have repaid
their TARP funds and repurchased their warrants as of June 30, 2009, see Table
2.10. These institutions are no longer part of TARP.
TABLE 2.10
CPP WARRANT REPURCHASES (PUBLIC) ($ MILLIONS)
Number of Amount of
Repurchase Warrants Repurchase as
Date Institution Repurchased of 6/30/2009
5/8/2009 Old National Bancorp 813,008 $1.2
5/20/2009 Iberiabank Corporationa 138,490 1.2
5/27/2009 FirstMerit Corporation 952,260 5.0
5/27/2009 Sun Bancorp, Inc. 1,543,376 2.1
5/27/2009 Independent Bank Corp. 481,664 2.2
6/17/2009 Alliance Financial Corporation 173,069 0.9
6/24/2009 First Niagara Financial Groupa 953,096 2.7
6/24/2009 Berkshire Hills Bancorp, Inc. 226,330 1.0
6/24/2009 Somerset Hills Bancorp 163,065 0.3
6/24/2009 SCBT Financial Corporation 303,083 1.4
6/30/2009 HF Financial Corp. 302,419 0.7
Total Warrants – Public 6,049,860 $18.7
CPP WARRANT REPURCHASES (PRIVATE) ($ MILLIONS)
Number of Amount of
Repurchase Preferred Repurchase as
Date Institution Shares of 6/30/2009
4/15/2009 Centra Financial Holdings, Inc./ 750 $0.8
Centra Bank, Inc.
4/22/2009 First ULB Corp. 245 0.2
5/27/2009 First Manitowoc Bancorp, Inc. 600 0.6
Total Preferred Shares – Private 1,595 $1.6
Notes: Numbers affected by rounding. Data as of 6/30/2009. This does not include the $60 million warrant repurchase by State Street
Corporation that occurred on 7/8/2009.
a
These institutions reduced the original amount of warrants issued through a qualified equity offering.

Treasury Lending Snapshots

Treasury snapshots were instituted in January 2009 as a means to track progress
toward the stated goal of CPP: “building a capital base of viable U.S. financial in-
stitutions, enabling them to continue lending to businesses and consumers during
this unprecedented financial crisis and economic downturn.”78 Treasury continues
to measure the lending activities of CPP recipients by performing both monthly
and quarterly data analysis.79 There are currently two types of monthly reports is-
sued on CPP. Originally, the monthly intermediation snapshots were conducted for
the 21 largest CPP participants. In March 2009, Treasury announced that it would
require all CPP participants to submit data for a new monthly lending report that
complements the monthly intermediation snapshots. The first monthly lending re-
port for all CPP participants was published on June 1, 2009, and included data for
February and March of 2009. A second monthly lending report with April data was
issued on June 19, 2009. Going forward, this report will be released around the
20th of each month.80 As of June 30, 2009, information from the 21 largest CPP
participants had been collected and released through April 2009.
April 2009 Monthly Intermediation Snapshot

The most recent monthly intermediation snapshot for the 21 largest CPP recipi-
ents was released on June 15, 2009, reporting data for the period of April 1, 2009,
to April 30, 2009. The responses found a decline in total new lending of 7% from
March to April; the report also included new information on small-business lending
that will be reported in all surveys going forward. Treasury reviewed and analyzed
the data and came to the following conclusions:81
• Consumer lending levels decreased as a result of a weakening labor market and

declines in household wealth.
• Commercial and industrial lending was reportedly “well below normal levels.”
• Banks reported $267 billion in outstanding small-business loan balances, with
$8 billion in small-business loan originations over the month.
For more information on the Capital Capital Assistance Program

Assistance Program, refer to SIGTARP’s On February 10, 2009, Treasury announced the Capital Assistance Program
April Quarterly Report, Section 2:
(“CAP”).82 The CAP process has two main steps for the 19 largest BHCs (all other
“TARP Overview.”
QFIs need not participate in the first step but have the option to participate in the
second step):83
• a “stress test” (also known as the Supervisory Capital Assessment Program

(“SCAP”)) to evaluate the 19 largest BHCs’ capital levels for their ability to with-
stand an adverse economic scenario
• an application to Treasury for funding in the form of additional capital infu-

Manditorily Convertible Preferred
sions or as a means to convert CPP investments to CAP mandatorily convertible
(“MCP”) shares: A type of preferred
preferred (“MCP”) shares (available to all QFIs) share (ownership in a company that
generally entitles the owner of the
CAP’s stated goal is to “ensure the continued ability of U.S. financial institu- shares to collect dividend payments)
tions to lend to creditworthy borrowers in the face of a weaker-than-expected that can be converted to common
economic environment and larger-than-expected potential losses.”84 As of June 30, stock under certain parameters at
2009, one institution had applied for but had not yet been approved for CAP. the discretion of the company — and
Since SIGTARP’s April Quarterly Report, the Federal Reserve released the must be converted to common stock
results of SCAP and provided recommendations for further actions that certain in- by a certain time.
stitutions will need to take to meet enhanced capital requirements. Of the 19 insti-
tutions that participated in SCAP, the Federal Reserve determined that 10 needed
approximately $75 billion total in additional capital, and the other 9 institutions
had sufficient capital to cover potential losses even in the more adverse scenario.85
Upon publication of the SCAP results, Treasury announced a November 9, 2009,
deadline for those 10 institutions that need to raise additional capital to meet the
enhanced capital requirements. Treasury also extended the application deadline for
all institutions wishing to participate in CAP to November 9, 2009.86 For a timeline
and description of the CAP process, see Figure 2.8 on the next page.
Supervisory Capital Assessment Program (“SCAP”)

SCAP, otherwise known as the “stress test,” was a key component of CAP. The
stress test was conducted by the FBAs with the stated intention of ensuring that
the largest financial institutions have sufficient capital to cover losses and continue
lending in a more adverse economic scenario than was anticipated at the time the
tests were conducted. All domestic BHCs with assets exceeding $100 billion at the
end of 2008 were required to participate. At the end of 2008, there were 19 BHCs
with assets of more than $100 billion, representing roughly two-thirds of aggregate
U.S. BHC assets.87
According to the Federal Reserve, the stress test was a forward-looking exer-
cise utilizing both a baseline and adverse scenario of the economy for the next two
years. The test was administered by various teams of supervisors and analysts from
the FBAs with specialized knowledge of the participating firms or expertise in spe-
cific asset classes or securities.88
On May 7, 2009, the Federal Reserve released the results of the SCAP pro-
cess, revealing that 9 of the 19 BHCs had sufficient capital to withstand the most
adverse scenario of the tests. As of June 30, 2009, eight of the nine institutions
that had sufficient capital under SCAP were approved by their FBAs and had
repaid their CPP funds, but had outstanding warrants owned by the Government.
As of the drafting of this report, State Street Corporation repurchased its related
warrants for $60 million making it the only institution out of the nine to be out of
FIGURE 2.8
CAPITAL ASSISTANCE PROGRAM PROCESS AND TIMELINE
FEBRUARY 2009
FEBRUARY 10 FEBRUARY 25
Treasury announces Treasury releases
Capital Assistance the terms for
Program (“CAP”). QFIs applying
for CAP funding.
FEBRUARY 25
Stress testing begins for Top 19 BHCs All Other QFIs
the top 19 BHCs.
MAY 7 Stress Test for Top

Federal Reserve and 19 BHCs
Treasury announce results
of stress test.
9 BHCs with 10 BHCs Need

Sufficient Capital Additional Capital
JUNE 8
10 BHCs that did not have
sufficient capital submitted Create a Capital Plan
their capital plans on how
they would raise the
necessary capital.
NOVEMBER 9
Deadline for 10 BHCs to Raise Capital in the
Private Market
raise additional capital.
NOVEMBER 9
Raised Still Needs Apply for CAP Apply to Convert CPP
Application deadline for
Sufficient Capital Additional Capital Funding Investments to CAP
applicants.
7 YEARS AFTER CAP

SETTLEMENT DATE
Conversion from CAP Convertible preferred
to Common Stock shares held by Government
mandatorily convert to
common shares, if not yet
voluntarily converted.
Note: Many of the 10 BHCs have raised significant funds on their own, which could seemingly limit their need for CAP.
Sources: Federal Reserve, “Banking Organizations Have Submitted Capital Plans To Bolster Their Capital,” 6/8/2009, www.federalreserve.gov, accessed 6/8/2009; Treasury, “Statement from Treasury Secretary
Tim Geithner Regarding the Treasury Capital Assistance Program and the Supervisory Capital Assessment Program,” 5/7/2009, www.financialstability.gov, accessed 5/7/2009; Treasury, “Secretary Geithner
Introduces Financial Stability Plan,” 2/10/2009, www.treas.gov, accessed 3/25/2009; Treasury Press Release, “U.S. Treasury Releases Terms of Capital Assistance Program,” 2/25/2009, www.treas.gov,
accessed 3/25/2009; Treasury, “Summary of Mandatorily Convertible Preferred Stock Terms,” 3/25/2009, www.treas.gov, accessed 3/25/2009.
.
“Tier One Capital” (“T1”) vs.

“Tier One Common” (“T1 Common”):
Two of the most relevant measures of
capital adequacy are tier one capital
(“T1”) and tier one common (“T1 Com-
mon”). For many TARP recipients, these
TARP.89 The ninth BHC, MetLife, is not a TARP recipient. The other 10 BHCs
two measures are significantly divergent
need to raise an additional $75 billion total of new capital in order to meet the
in the current market, capturing different
capital level deemed necessary to withstand a more adverse economic scenario. aspects of the institution’s health or lack
Options for raising the needed capital for these institutions include, but are not thereof.
limited to: issuing common stock, exchanging preferred shares for common shares,
selling non-core businesses, increasing corporate earnings, or applying for CAP T1 or “core capital” consists primarily
of common equity (including retained
investments. Those failing to raise private funds would be required to take CAP
earnings), limited types and amounts
funds or convert their CPP funds to mandatory convertible shares; however, many
of preferred equity, certain minority
financial institutions have raised significant funds on their own, which could seem- interests, and limited types and amounts
ingly limit their need for CAP.90 Nine of the 10 BHCs needing additional capital of trust preferred securities. T1 does
have begun raising this capital in the private markets; the remaining BHC, Morgan not include goodwill and certain other
Stanley, has already raised its additional capital and repaid its TARP funding. intangibles. Certain other assets are also
excluded from T1. It can be described as
a measure of the bank’s ability to sustain
SCAP Assumptions
future losses and still meet depositor’s
The stress test was designed to determine how much additional capital each insti- demands. Federal regulators look at T1
tution may need to remain well capitalized in adverse economic conditions until to calculate the tier one capital ratio (“T1
the end of 2010. Well capitalized was a standard defined as being able to main- Ratio”), which determines what percent-
tain a 6% tier one risk-based capital ratio (“T1 Ratio”) and a 4% tier one common age of a bank’s total assets is catego-
rized as T1. Under traditional Federal
risk-based ratio (“T1 Common Ratio”), which is also known as a tangible common
regulations, a bank with a T1 Ratio of
equity ratio (“TCE Ratio”).91 Generally, the Federal Reserve’s risk-based capital
4% or greater is considered adequately
guidelines for BHCs require a minimum 4% T1 Ratio; however, supervisors expect capitalized.
BHCs to hold T1 well in excess of the minimum ratio. Supervisors have indicated
that common equity (the component of T1 most able to absorb losses) should be T1 Common, also known as tangible
the dominant component of T1. The calculation of a T1 Common Ratio assessed common equity (“TCE”), is calculated
by removing all non-common elements
the composition of the BHCs’ T1 Ratio to determine whether common equity was
from T1, e.g., preferred equity, minority
sufficiently dominant. Once these two ratios were calculated, supervisors followed
interests, and trust preferred securities.
the normal supervisory evaluation process to determine whether a firm’s current It can be thought of as the amount that
capital was sufficient in light of its risk profile.92 SCAP’s required ratios are higher would be left over if the bank were dis-
than current Federal regulations. solved and all creditors and higher levels
In SCAP, the regulators created two forward-looking economic scenarios. The of stock, such as preferred stock, were
paid off. T1 Common is the highest “qual-
first scenario was a baseline forecast for 2009 and 2010 based on the most recent
ity” of capital in the sense of providing a
projections available from three professional forecasters prior to the start of the
buffer against loss by claimants on the
stress test on February 25, 2009.93 Although the baseline was intended to forecast bank. T1 Common is used in calculating
likely economic metrics, the unemployment rate eclipsed the baseline assump- the tier one common risk-based ratio
tion of an annual average of 8.4% unemployment with the June 2009 unemploy- (“T1 Common Ratio”) which determines
ment rate of 9.5%.94 The second scenario evaluated the institutions under worse what percentage of a bank’s total assets
is categorized as T1 Common. The high-
economic conditions than those provided in the baseline forecast — an “adverse
er the percentage, the better capitalized
case” scenario. The assumptions for the baseline and adverse case compared to the
the bank. Preferred stock is an example
of capital that is counted in T1, but not in
T1 Common. For more information on a
bank’s capital structure, see the “Capital
Structure Tutorial” in SIGTARP’s April
Quarterly Report.
economic indicators as of June 30, 2009, are in Table 2.11, and demonstrate that
Tier One Capital (“T1”): = Common as of June 30, 2009, two of the three indicators (Real GDP and Unemployment)
stockholders’ equity + Preferred equity indicate that the economic downturn may be more severe than even the adverse
(subject to regulatory limits) + Minority scenario for 2009.
interests + Trust preferred securities To understand how much capital is needed to withstand a certain amount of
(subject to regulatory limits) – Good-
losses and still maintain a capital buffer of at least a 6% T1 Ratio and at least a 4%
will – Certain other assets (subject to
T1 Common Ratio, the BHCs were asked by their FBA regulators to project esti-
regulatory limits).
mated losses on loans, securities, and trading-related exposures based upon 2008
year-end financial data.95
Tier One Common Equity (“T1 Com-
mon”): = T1 – Preferred equity – According to the Federal Reserve, under the more adverse scenario, together
Minority interests – Trust preferred the 19 BHCs had approximately $837 billion in T1, $413 billion of which was T1
securities. Common. These BHCs estimated their net losses to be $185 billion for 2009 and
Tier One Risk-based Capital Ratio (“T1 2010. That would leave them with a required SCAP buffer of $74.6 billion un-
Ratio”): = T1/Risk-weighted assets der the adverse scenario. When calculating the required SCAP buffer, FBAs took
into account financial results and any actions that BHCs may have taken dur-
Tier-One Common Risk-based Ratio ing the first quarter of 2009.96 For example, SCAP took into account Citigroup’s
(“T1 Common Ratio”): = T1 Common / announced exchange offer on February 27, 2009. The announced offer was to
Risk-weighted assets convert private preferred and Treasury’s CPP investments to common equity, which
Professional Forecasters: Economic TABLE 2.11

expert firms that use various economic STRESS TEST AND CURRENT MACROECONOMIC SCENARIOS
data to publish their own projections. 2009 Scenarios 2010 Scenarios Economic
The three forecasters used for the More More Indicators, as of
purpose of the stress test were the Baseline Adverse Baseline Adverse 6/30/2009
Consensus Forecasts, the Blue Chip Real GDP
(2.0%) (3.3%) 2.1% 0.5% (5.5%)
Survey, and the Survey of Professional (% Change in Annual Average)
Forecasters. They are independent of Annual Average Civilian

8.4% 8.9% 8.8% 10.3% 9.5% a
Unemployment Rate
Treasury.
House Prices
(% Change Relative to Q4 (14.0%) (22.0%) (4.0%) (7.0%) (18.6%) b
SCAP Buffer: The amount of capital of Prior Year)
needed for an institution to sustain a
Notes: As reported by the source document, baseline forecasts for real GDP and the unemployment rate equal the average of projec-
6% Tier One Ratio and a 4% Tangible tions released by Consensus Forecasts, the Blue Chip Survey, and the Survey of Professional Forecasters in February 2009.
a
9.5% is the annualized rate, not the “annual average.”
Common Equity Ratio under the more b
Number is based off of the S&P Case-Shiller 10-city Home Price Index for first quarter of 2009.
adverse economic scenario. Sources: Federal Reserve, “The Supervisory Capital Assessment Program: Design and Implementation,” 4/24/2009;
Real GDP as of 6/30/2009: Bureau of Economic Analysis, “Gross Domestic Product, 1st quarter 2009 (final),” 6/25/2009,
www.bea.gov, accessed 7/9/2009; Unemployment rate as of 6/30/2009: Department of Labor, “The Employment Situation: June
2009,” 6/30/2009, www.bls.gov, accessed 7/9/2009; Changes in Housing Prices as of 6/30/2009: Treasury Office of Thrift Super-
vision, “First Quarter 2009 Thrift Industry Report — Economic Data,” 6/2/2009, www.files.ots.treas.gov, accessed 7/10/2009.
TABLE 2.12
in effect, increased its T1 Common. The terms of the exchange offer subsequently
SCAP RESULTS FOR THE LARGEST 19
were finalized on June 9, 2009, and are described later in this section. BHCs ($ BILLIONS)
Table 2.12 shows the SCAP buffer calculation in aggregate for all 19 BHCs un- Tier One Capital $836.7
der the more “adverse” scenario. Table 2.13 shows the results of SCAP for the 10 Tier One Common Capital (included
412.5
BHCs needing additional capital, and Table 2.14 shows the results of SCAP for the in above amount)
9 BHCs that have sufficient capital to withstand the more adverse scenario detailed Total Estimated Losses (599.2)
Add Purchase Accounting
under SCAP. 64.3
Adjustments
Add Resources other than Capital to
362.9
Post-SCAP Alternatives Absorb Losses
On June 8, 2009, the 10 BHCs requiring additional capital to meet the capital SCAP Buffer as of 12/31/2008 $185.0
buffer requirement submitted detailed capital plans to their FBAs outlining how Less Capital Actions and Effects of
110.4
1st Quarter Results
they planned to raise the necessary capital. According to the Federal Reserve, these
Required SCAP Buffer $74.6
capital plans, when implemented, “would provide sufficient capital to meet the re-
quired buffer under the assessment’s more adverse scenario.”97 The Federal Reserve Source: Board of Governors of the Federal Reserve, “The
Supervisory Capital Assessment Program: Overview of Results,”
has also stated that it will work with the institutions to ensure their plans get 5/7/2009.
TABLE 2.13
SCAP RESULTS FOR INSTITUTIONS NEEDING ADDITIONAL CAPITAL ($ BILLIONS)
Bank of Wells Sun Morgan Fifth

America Fargo GMAC Citigroup Regions Trust Stanley KeyCorp Third PNC Total
Tier One Capital $173.2 $86.4 $17.4 $118.8 $12.1 $17.6 $47.2 $11.6 $11.9 $24.1
Tier One Common Capital 74.5 33.9 11.1 22.9 7.6 9.4 17.8 6.0 4.9 11.7
Total Estimated Losses 136.6 86.1 9.2 104.7 9.2 11.8 19.7 6.7 9.1 18.8
Purchase Accounting
13.3 23.7 — — — — — — — 5.9
Adjustments
Projected Non-Capital
74.5 60.0 (0.5) 49.0 3.3 4.7 7.1 2.1 5.5 9.6
Resourcesa
SCAP Shortfall as of
46.5 17.3 6.7 92.6 2.9 3.4 8.3 2.5 2.6 2.3
12/31/2008
1 Quarter Results and Actions
st
12.7 3.6 (4.8) 87.1 0.4 1.3 6.5 0.6 1.5 1.7
Additional Capital Required $33.9 $13.7 $11.5 $5.5 $2.5 $2.2 $1.8 $1.8 $1.1 $0.6 $74.6

a
Resources include Pre-provision Net Revenue (“PPNR”) and the resources available from the allowance for loan and lease losses.
Source: Board of Governors of the Federal Reserve, “The Supervisory Capital Assessment Program: Overview of Results,” 5/7/2009.
TABLE 2.14
SCAP RESULTS FOR INSTITUTIONS NOT NEEDING ADDITIONAL CAPITAL ($ BILLIONS)

American Bank of NY Goldman JPMorgan State
Express BB&T Co. Mellon CapitalOne Sachs Chase MetLife Street USB
Tier One Capital $10.1 $13.4 $15.4 $16.8 $55.9 $136.2 $30.1 $14.1 $24.4
Tier One Common
Capital 10.1 7.8 11.0 12.0 34.4 87.0 27.8 10.8 11.8
Total Estimated Losses 11.2 8.7 5.4 13.4 17.8 97.4 9.6 8.2 15.7
Purchase Accounting
— — — 1.5 — 19.9 — — —
Adjustments
Projected Non-Capital
11.9 5.5 6.7 9.0 18.5 72.4 5.6 4.3 13.7
Resourcesa
SCAP Shortfall as of
— — — — — — — — —
12/31/2008
1st Quarter Results and
0.2 0.1 (0.2) (0.3) 7.0 2.5 0.6 0.2 0.3
Actions
Additional Capital
Required — — — — — — — — —

a
Resources include PPNR and the resources available from the allowance for loan and lease losses.
Source: Board of Governors of the Federal Reserve, “The Supervisory Capital Assessment Program: Overview of Results,” 5/7/2009.
implemented quickly and are completed by the November 9, 2009, capital-raising

deadline.98 The capital plan must include the following:99
• detailed description of the actions that will be taken to raise the amount of capi-
tal and/or type of capital needed to meet the SCAP buffer
• list of steps to address weaknesses in the BHC’s internal processes for managing
and maintaining effective capital
• outline of steps that the BHC will take to repay TARP funds over an allotted
time and reduce reliance on guarantees through FDIC’s TLGP
Should a BHC not meet its required SCAP buffer by November 9, 2009, it will
have to take additional capital assistance through CAP. This may include either
Treasury-approved conversion of the BHCs’ CPP investment to CAP MCP shares
or the issuance of new CAP MCP shares.100 As of June 30, 2009, many financial
institutions have raised significant funds on their own, which could seemingly limit
their need for CAP. Table 2.15 shows how the following banks have already begun
to raise capital in different ways.
Status of CAP
According to Treasury, those institutions that were not part of SCAP have until
November 9, 2009, to apply for the CAP program. When applying for CAP, QFIs
can either apply directly for additional TARP funding in the form of CAP MCP
shares or apply to convert their CPP preferred shares in exchange for CAP MCP For more information on the Capital
shares. 101 As of June 30, 2009, only one institution had applied for CAP, and none Assistance Program terms and condi-
tions, see SIGTARP’s April Quarterly
had yet been funded.
Report, Section 2: “TARP Overview.”
TABLE 2.15
SCAP PROGRESS AS OF 6/30/2009 ($ BILLIONS)

Capital Capital Raised/
Needed per Announced as of Capital Needed
Financial Institution SCAP l 6/30/2009 by 11/9/2009 Method of Raising Capital
Exchange offering, common equity offering, reduced dividends,
Bank of Americaa $33.9 $33.9 —
gain from dispositions
Citigroupb 5.5 5.5 — Expanded already announced exchange offer
Fifth Third Bancorp c
1.1 2.2 — Exchange offering, tender offering
Received $7.5 billion from MCP share issuance to Treasury
GMAC LLCd 11.5 3.5 8.0
through AIFP ($3.5 billion used to meet capital requirements)
Keycorpe 1.8 1.3 0.5 Exchange offering
Morgan Stanleyf,g 1.8 2.2 — Public equity offering
PNC h
0.6 0.6 — At-the-market equity offering
Regions Financial Corpi 2.5 2.5 — Exchange offering
SunTrustj 2.2 2.1 0.1 Equity offering, tender offering
Wells Fargo k
13.7 8.6 5.1 Equity offering
Total $74.6 $62.5 $13.7
Sources:
a
Bank of America, “Press Release,” 6/25/2009, newsroom.bankofamerica.com/index. g
Morgan Stanley has since repaid its TARP funds on 6/17/2009.
php?s=43&item=8485, accessed 6/23/2009. h
PNC, “Press Release,” 5/27/2009, http://pnc.mediaroom.com/index.php?s=43&item=635,
b
Citigroup Inc., “Press Release,” 5/7/2009, www.citigroup.com/citi/press/2009/090507f.htm, accessed 6/23/2009.
accessed 6/30/2009. i
Regions Financial, “Press Release,” 6/18/2009, www.regions.com/about_regions/IR_newsreleases.
c
Fifth Third Bancorp, 8-K, 6/4/2009, www.sec.gov, accessed 6/23/2009. html, accessed 6/30/2009.
d
Treasury, Transaction Report, 7/2/2009, www.financialstability.gov, accessed 7/2/2009. j
SunTrust, 8-K, 6/8/2009, www.sec.gov, accessed 6/23/2009.
e
Keycorp, “Press Release,” 6/3/2009, www.snl.com/irweblinkx/file.aspx?IID=100334&FID= k
Wells Fargo, “Press Release,” 5/8/2009, www.wellsfargo.com/press/2009/20090508_stock_
7893270, accessed 6/23/2009. raise_results, accessed 6/23/2009.
f
Morgan Stanley, “Press Release,” 6/2/2009, www.morganstanley.com/about/press/articles/ l
Board of Governors of the Federal Reserve, “The Supervisory Capital Assessment Program: Overview
beb071fc-4f61-11de-96f6-3f25a44c9933.html, accessed 6/23/2009. of Results,” 5/7/2009.
60 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM 60
Systemically Significant Failing Institutions Program

According to Treasury, the Systemically Significant Failing Institutions (“SSFI”)
program was established to “provide stability and prevent disruptions to financial
markets from the failure of institutions that are critical to the functioning of the
nation’s financial system.”102 As of June 30, 2009, $69.8 billion has been allocated
through the SSFI program to American International Group, Inc. (“AIG”), the sole
participant.
American International Group, Inc.

The $69.8 billion of TARP funds allocated to AIG includes $40 billion of preferred
Equity Capital Facility: A commitment stock purchased from AIG on November 25, 2008, and the more recent establish-
to invest equity capital in a firm under ment of a $29.8 billion equity capital facility. AIG used the proceeds of Treasury’s
certain future conditions. initial stock purchase to reduce the amount it had previously borrowed from the
Federal Reserve.103 On March 2, 2009, Treasury and the Federal Reserve an-
Securities Exchange: An agreement be- nounced a restructuring and sale of certain assets that will allow the company to
tween a firm and investors, permitting repay a portion of the Federal Reserve’s assistance packages to AIG. This overall
the investors to exchange one class of restructuring of the Government’s interests included a securities exchange, the
securities for another. previously mentioned $29.8 billion equity capital facility, and an amendment to the
Federal Reserve’s Revolving Credit Facility. According to Treasury, the restructuring
will strengthen the company’s finances and is a long-term solution for AIG, its cus-
tomers, U.S. taxpayers, and the financial system as a whole.104 On April 17, 2009,
Treasury and AIG signed the securities exchange agreement and the equity facility
agreement as part of AIG’s ongoing restructuring efforts.105 According to Treasury,
“orderly restructuring is essential to AIG’s repayment of the support it has received
from U.S. taxpayers and to preserving financial stability.”106
Restructuring
AIG’s “orderly restructuring” goes beyond the restructuring of its Government
assistance to include an internal restructuring plan for the company’s assets and
risk positions. This internal restructuring, which includes asset sales, is an attempt
by AIG to “protect and enhance the value of its key businesses, and position these
franchises for the future as more independently run, transparent companies.”107
Subsequent to SIGTARP’s April Quarterly Report, the following restructuring
transactions have transpired:108
• Government Agreements: Agreements for a securities exchange and eq-
uity capital facility have been executed, and changes to the Federal Reserve
Revolving Credit Facility have been made.
• Separation Activities: Two of AIG’s largest foreign life insurance businesses
— American International Company Ltd. (“AIA”) and American Life Insurance
Company (“ALICO”) — have been put into special purpose vehicles (“SPVs”),
61 QUARTERLY REPORT TO CONGRESS I JULY 21, 2009 61
with significant preferred stock interests in those SPVs used to pay down the
Federal Reserve Revolving Credit Facility.
• Financial Products Corp. Unwind: AIG continues to reduce the risk of its
derivatives portfolios held by its subsidiary, Financial Products Corp.
• Asset Sales: AIG continues to sell off subsidiaries that are not part of its core
business.
Government Agreements
The restructuring of the Government’s assistance package for AIG involved
three new agreements with two Government agencies. The securities exchange
and equity capital facility are Treasury agreements, and the amended Revolving
Credit Facility is with the Federal Reserve. All three agreements are subject to
Government inspection and control requirements. Provisions for the AIG-Treasury
contracts include, among others, inspection rights, internal control establishment,
executive compensation limits, limited lobbying activity, use of funds reporting,
and dividend rate adjustments. Table 2.16 illustrates these provisions in more
detail.
TABLE 2.16
STANDARD PROVISIONS FOR AIG TREASURY CONTRACTS

Provision Description
Treasury, SIGTARP, and the Comptroller General of the United States
Inspection Rights have access to personnel, and any books, papers, records, or other
data.
AIG must establish internal controls to ensure compliance with the
Internal Controls terms of the contract, and must report on the implementation of the
internal controls quarterly.
AIG must comply with all EESA executive compensation requirements
and any amendments. AIG must also make its best efforts to comply
Executive Compensation
with the executive compensation restrictions to non-U.S.-based
senior employees.
AIG shall continue to maintain and implement its policy on lobbying,
Limited Lobbying Activity
governmental, ethics, and political activities.
Dividend Rate Adjustment Treasury can change the dividend rate with the objective of
protecting the U.S. taxpayer.
Preferred Stock Directors In the event that the board does not declare dividends for four
quarters (does not need to be consecutive), Treasury has the right
to elect the greater of (a) two members of the board of directors or
(b) 20% of the entire board (currently there are 11 directors). Upon
the receipt of four consecutive full dividend payments, the board
members will step down.
Note: The executive compensation requirements released on 5/15/2009 apply to AIG.

Source: Treasury, “Securities Exchange Agreement dated as of April 17, 2009, between American International Group, Inc. and
United States Department of the Treasury,” 4/17/2009, www.financialstability.gov/docs/agreements/Series.E.Securities.Exchange.
Agreement.pdf, accessed 6/8/2009.
Securities Exchange Agreement

The securities exchange allows AIG to replace the 4 million shares of cumulative
preferred stock issued to Treasury in November 2008 (“Series D stock”) worth $40
Cumulative Preferred Stock: A type of billion with 400,000 shares of non-cumulative preferred stock (“Series E stock”)
stock that requires a defined dividend worth $41.6 billion.109 The price of the Series E stock was set at the total value of
payment. If the company does not pay the Series D stock plus any unpaid dividends.110 The Series D stock paid a 10% an-
the dividend, it still owes the missed nual dividend (paid quarterly), and the new Series E stock will pay a 10% dividend
dividends to the owner of the stock. if the board of directors declares dividends.111 AIG may only repurchase the new
Series E stock with the proceeds of new sources of private capital.112 In addition
Non-cumulative Preferred Stock: Unpaid
to the newly issued preferred stock, AIG has issued warrants to Treasury. These
dividends do not accrue on shares of
warrants are exercisable for 2,689,938.3 shares of common stock, which represent
stock when a company does not make
2% of AIG’s outstanding common stock as of June 30, 2009.113 The warrants have
a dividend payment.
a strike price of $50, and, on June 30, 2009, the current price of AIG stock was
Reverse Stock Split: A method used by $23.20. On June 30, 2009, AIG had a 1-for-20 reverse stock split, which increased
corporations to reduce the number of the stock price by a multiple of 20 and reduced the shares outstanding by a quo-
shares outstanding and increase the tient of 20. The warrants adjust by the same multiple as the stock; the previously
share price proportionally. The total stated terms of the warrants reflect this reverse stock split.
value of the shares outstanding remains
the same. Based on the AIG reverse Equity Capital Facility
stock split, if a shareholder owned 100 The equity capital facility was announced as a five-year, $30 billion agreement
shares of common stock valued at $1 between AIG and Treasury.114 Under the agreement, AIG agrees to issue and sell to
before the 1-for-20 reverse stock split,
Treasury 300,000 shares of 10% non-cumulative preferred stock (“Series F stock”),
after the reverse stock split the share-
plus warrants to purchase 150 shares of common stock.115 Dividends on the Series
holder would own 5 shares of stock
F stock do not accumulate and are only owed when declared by the board of direc-
valued at $20 each.
tors. The strike price of the warrants is $0.00002 per share.116 On June 30, 2009,
AIG’s common stock price was $23.20 per share. The agreement terms reflect the
June 30, 2009, reverse stock split.
Technically, Treasury has already acquired all 300,000 shares of Series F stock,
but the shares had no value until cash was disbursed from Treasury to AIG. Upon
such disbursements, the facility is said to be “drawn upon,” and the value of Series
F stock increases by the amount of the drawdown.117 In order to draw down the
equity capital facility, AIG must provide an outline of the expected uses of the
funds.118 As of June 30, 2009, AIG has drawn down $1.15 billion to improve the
capitalization of its domestic life insurance and retirement services businesses.119
In March 2009, AIG made $165 million in retention payments to certain
employees in its Financial Products Corp. and Trading Group Inc. subsidiaries
(“AIGFP Retention Payment Amount”).120 In an attempt to recoup the $165 mil-
lion from AIG, Treasury reduced the amount of capital available through the equity
capital facility by $165 million. This reduced the $30 billion value of the facility to
$29.835 billion. In addition to the AIGFP Retention Payment Amount, Treasury
assigned a $165 million commitment fee to AIG for the use of the facility.121 The
commitment fee is due in three installments of $55 million on each of the follow-
ing dates: December 17, 2010; August 17, 2012; and April 17, 2014, and must be
paid from the operational capital of AIG.122
Federal Reserve Revolving Credit Facility

The Federal Reserve will make several modifications to the Revolving Credit
Facility established in September 2008:
• The credit facility will be repaid and reduced in exchange for up to approxi-
mately $26 billion in preferred interests in two special purpose vehicles created
to hold all of the outstanding common stock ALICO and AIA.123
– The total amount available under the Revolving Credit Facility will be reduced
to $25 billion.
• The Federal Reserve will make up to $8.5 billion in new loans to AIG. The loans Derivative: A financial instrument whose
will be repaid by the cash flow received from designated blocks of the domestic value is based on (“derived from”) a
life insurance subsidiaries of AIG.124 different underlying asset, indicator, or
• The interest rate on the facility is the three-month London Interbank Offered financial instrument.
Rate (“LIBOR”) plus 300 basis points. The previous interest rate floor of 3.5%
Credit Default Swap (“CDS”): A contract
will be removed from the credit facility.125
where the seller receives a series of pay-
ments from the buyer in return for agree-
AIG Financial Products Corp. Unwind
ing to make a payment to the buyer
AIG Financial Products Corp. (“AIGFP”) is a subsidiary of AIG whose primary
when a particular credit event outlined in
business is trading in derivatives of stocks, bonds, credit, and commodities as well the contract occurs (for example, if the
as energy trading and trading in the foreign exchange markets. Derivatives are credit rating on a particular bond or loan
financial instruments that “derive” their value from something else (residential is downgraded or goes into default). It
mortgage-backed securities, commercial mortgage-backed securities, etc.). AIG’s fi- is commonly referred to as an insurance
nancial woes were largely a result of AIGFP’s position as underwriter of one type of product where the seller is providing
derivative, credit default swaps (“CDSs”), that sustained substantial losses in 2008. the buyer insurance against the failure
AIGFP’s CDS exposure on multi-sector collateralized debt obligations (“CDOs”) of a bond. The buyer, however, does
alone accounted for approximately $19 billion of the $24.5 billion in losses AIG not need to own the asset covered by
announced in the third quarter of 2008. the contract, which means it can serve
essentially as a “bet” against the underly-
The downgrade of AIG’s AAA credit rating by the rating agencies triggered a
ing bond.
credit event under many of its derivative contracts. This event required AIGFP to
post additional collateral to its counterparties. As of November 5, 2008, AIGFP had
Collateralized Debt Obligation (“CDO”):
posted or agreed to post $37.3 billion in collateral to its counterparties. These col-
A financial instrument that entitles the
lateral postings payments exceeded the funds AIG had available, and that is when purchaser to some portion of the cash
the Federal Reserve and Treasury began providing assistance to stabilize the com- flows from a portfolio of assets, which
pany. Part of AIG’s restructuring plan involves the unwinding of AIGFP’s derivative may include bonds, loans, mortgage-
exposure. According to AIG’s first-quarter financial statements, released May 7, backed securities, or other CDOs.
2009, AIGFP has begun to reduce the exposed risk of AIG; the notional amount
of AIG’s derivative portfolio exposure has been reduced by more than 40% — from Notional: Face value.
approximately $2.7 trillion to approximately $1.5 trillion.
Asset Sales
AIG has also begun a large-scale asset divestiture plan in a move to “protect and
enhance the value of its key business.”126 AIG has completed the sale of eight sub-
sidiaries and one large office building in Tokyo. When AIG sells an asset, the total
sale price could be in the form of cash or AIG debt assumed by the purchaser. The
total sales price of the nine completed sales is approximately $5.3 billion, includ-
ing approximately $4.6 billion cash and notes and $726 million debt assumed by
the purchasers. Table 2.17 lists the assets and the respective sale prices with the
applicable debt assumptions by the purchasers.127
TABLE 2.17
AIG ASSET SALES ($ MILLIONS)
Debt Assumed Total Sale

Subsidiary Cash by Purchaser Price
AIG PhilAm Savings Bank, PhilAm Auto Financing
$43 $— $43
and Leasing, and PFL Holdings
Hartford Steam Boiler 739 76 815
AIG Insurance Company of Canada 263 — 263
AIG Retail Bank Public Company Limited and its
credit card operations, AIG Card (Thailand) 45 495 540
Company Limited, in Thailand
AIG Private Bank Limited 253 55 308
Deutsche Versicherungs-und
26 — 26
Rückversicherungs-Aktiengesellschaft
AIGFP Commodity Index Business 150 — 150
21st Century Insurance Group 1,900 100 2,000
Tokyo Office Building 1,200 — 1,200
Total $4,619 $726 $5,345
Note: These numbers and announcements are from the unaudited quarterly report and press releases.
Sources: American International Group, Inc., 10-Q, “Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934,” 3/31/2009, www.sec.gov/Archives/edgar/data/5272/000095012309008272/y76976e10vq.htm, accessed
7/9/2009, pp. 3-4; AIG Press Release, “AIG Completes Sale of Prime Tokyo Real Estate Asset to Nippon Life Insurance Company,”
5/28/2009, ir.aigcorporate.com/phoenix.zhtml?c=76115&p=irol-newsArticle&ID=1293557&highlight=, accessed 7/10/2009;
AIG Press Release, “AIG Financial Products Corp Completes Sale of Commodity Index Business,” 5/7/2009, ir.aigcorporate.com/
phoenix.zhtml?c=76115&p=irol-newsArticle&ID=1285771&highlight=, accessed 7/10/2009.
Targeted Investment Program and Asset Guarantee Program

Under the Targeted Investment Program (“TIP”), Treasury had invested, as of
June 30, 2009, $40 billion of TARP funds in Citigroup and Bank of America.
Furthermore, under the Asset Guarantee Program (“AGP”), Treasury had commit-
ted a total of $5 billion to support $301 billion of assets held by Citigroup. As of
June 30, 2009, Citigroup is the sole participant in AGP.
• Stated goal of TIP: To invest funds, on a case-by-case basis, “to strengthen the
economy and protect American jobs, savings, and retirement security” where
“the loss of confidence in a financial institution could result in significant mar-
ket disruptions that threaten the financial strength of similarly situated financial
institutions.”128
• Stated goal of AGP: To use insurance protections to help stabilize at-risk
financial institutions. Treasury insures a select pool of troubled assets and col-
lects premiums in return. This program differs from other financial institution
solvency programs in that Treasury does not invest TARP funds in the institu-
tion directly; rather, TARP funds are reserved to cover a portion of the possible
losses in the selected assets.129
Citigroup Inc.
Treasury has provided no financing to Citigroup beyond its earlier CPP, TIP, and
AGP funding. Citigroup has received a total of $50 billion in TARP funding over
three installments:
• CPP: $25 billion on October 28, 2008
• TIP: $20 billion on December 31, 2008
• AGP: $5 billion loss protection on January 15, 2009
The $5 billion AGP commitment is for Treasury’s portion of the loss exposure Ring-Fencing: Segregating assets from
on the ring-fencing of approximately $301 billion worth of troubled Citigroup the rest of a financial institution, often so
assets. This amount has not been paid directly to Citigroup, but rather, has been that asset problems can be addressed in
placed in reserve against the possibility of future losses on the assets in the ring- isolation.
fence.130 There have been no additional TARP funds allocated to Citigroup since
SIGTARP’s April Quarterly Report. However, Treasury’s investments in Citigroup Exchange: In reference to Citigroup
agreement, taking one type of stock
have been modified through a set of exchange offerings that were finalized on
(e.g., preferred) and converting it at a
June 9, 2009.131 The effects of these exchange offers are mixed. The CPP exchange
specific rate to another type of stock
will reduce the dividends payable to Treasury, and Treasury will receive a more
(e.g., common).
junior position on the conversion of those shares in the event of a bankruptcy. The
TIP and AGP exchange to trust preferred securities will result in Treasury having a
For more information on Treasury’s original more senior claim in bankruptcy and Treasury will have a higher priority to receive
investments in Citigroup, see SIGTARP’s regular interest payments.132 Additionally, Citigroup is implementing a Tax Benefit
Initial Report and SIGTARP’s April Preservation Plan to protect its shareholders from the potential loss of value of
Quarterly Report. tax benefits through the dilution that is caused by the exchanges. If followed by
shareholders, this plan will protect a large amount of tax benefits — such as loss
carry-forwards — that Citigroup can use to offset future income.133 A more detailed
description of this plan is provided later in this section.
Loss Carry-Forward: Technique used
to apply a loss from the current year Citigroup Exchange Offering
to a future year in order to reduce the On June 9, 2009, Citigroup finalized several private and public preferred securi-
company’s future tax liability. ties exchange offers that were announced on February 27, 2009. These exchanges
generally involve arranging for preferred shareholders, including Treasury, to trade
Interim Security: In the case of the in their shares for new interim securities that can be converted to common stock at
Citigroup exchange, a preferred stock the request of Citigroup.134 This will permit the interim securities to be counted as
that is convertible and designated as a
“tangible common equity,” thus strengthening Citigroup’s capital structure. When
common stock equivalent.
Citigroup originally announced this exchange offering in February 2009, it intend-
ed to exchange up to $27.5 billion of its non-Treasury held preferred securities, and
Treasury-Owned Preferred Stock:
Treasury had announced that it would match up to $25 billion of the non-Treasury
Comprises CPP preferred stock, AGP
preferred stock, and TIP preferred held shares exchanged with its CPP preferred shares (Treasury-owned preferred
stock. stock). Since then, Citigroup participated in Treasury’s stress test (Supervisory
Captial Asset Program, or SCAP) to determine an appropriate capital buffer for the
firm in case of adverse economic conditions. Treasury concluded that Citigroup
needed to raise $5.5 billion in tangible common equity, even after receiving credit,
during the SCAP testing, for the $52.5 billion to be exchanged. On May 7, 2009,
Citigroup announced it will expand the original private portion of its exchange
offering by $5.5 billion to meet the required buffer under SCAP.135 Refer to the
“Capital Assistance Program” discussion in this section for more detail on SCAP.
Citigroup has offered the exchange until July 24, 2009, to both its private and
public preferred shareholders, with Treasury agreeing to match up to $25 bil-
lion of its CPP preferred shares in the transactions. Should there be full (private,
public, and Treasury) participation. Citigroup would convert approximately $58
TABLE 2.18
CITIGROUP PREFERRED STOCK EXCHANGE PARTICIPANTS ($ BILLIONS)

Outstanding Maximum Participation
Private Preferred $12.5 $12.5
Public Preferred and Trust Preferred 30.6 20.5
Treasury-Owned Preferred 50.0 25.0
Total $93.1 $58.0
Note: Public preferred and trust preferred are combined because public preferred shareholders will exchange first during the exchange
of public preferred shares, and trust preferred will make up the difference to complete the transaction.
Source: Citigroup, Schedule 14A, 6/10/2009, www.sec.gov/Archives/edgar/data/831001/000119312509128779/dprer14a.htm,
accessed 6/15/2009.
FIGURE 2.9
CITIGROUP EXCHANGE OVERVIEW
PRE-EXCHANGE OWNERSHIP
Private Preferred Public Preferred Newly Created

Treasury
Shareholder Shareholder Trust
Private Preferred Public Preferred CPP Preferred Trust Preferred

Stock Stock Stock Security
TIP Preferred
Stock
AGP Preferred
Stock
POST-EXCHANGE OWNERSHIP
Private Preferred Public Preferred Newly Created

Treasury
Shareholder Shareholder Trust
Interim Interim Interim TIP Preferred

Securities Securities Securities Stock
Public Preferred Trust Preferred AGP Preferred

Stocka Security Stock
Notes: Private preferred stock, public preferred stock, and CPP preferred stock will be exchanged for
interim securities until shareholders approve the transaction.
a
If the Public Preferred Exchange has maximum participation, there will be $10.05 billion of Public
Preferred Stock outstanding.
Source: Citigroup, Exchange Agreement, 6/9/2009, www.sec.gov, accessed 6/10/2009.
billion of its preferred stock.136 Table 2.18 lists the total value of the outstanding
preferred stock by exchange participants and the maximum participation allowed by
Citigroup in the exchange agreement.
The exchange offer closing and conversion to common stock is dependent on
many factors, including regulatory and shareholder approvals. Figure 2.9 illustrates
the ownership of the participating shareholders pre- and post-exchange. Treasury,
public shareholders, and private shareholders are holding interim securities until
they receive shareholder approval. The details of each transaction are discussed in
the following sections.
Private Preferred Exchange Offer

According to the exchange agreements, the private preferred shareholders will
exchange their shares first on the condition that they elect to exchange at least
FIGURE 2.10 $11.5 billion of preferred shares. Under the exchange, Treasury will convert a por-
tion of its CPP investment that is matched to the amount of preferred shares being
CITIGROUP PRIVATE PREFERRED exchanged by private preferred shareholders and will receive from Citigroup the
EXCHANGE PROCESS
following assets in exchange:137
PRIVATE PREFERRED • interim securities that will convert to common stock upon shareholder approval
SHAREHOLDERS • a warrant to purchase common shares should shareholder approval not be
obtained
Public
Preferred Stock
The interim securities are designed to encourage shareholder approval of their
Exchange private
exchange. For example, they will pay a 9% dividend that, should shareholder ap-
preferred stock for
proval not be obtained within six months, will increase by two percentage points
interim securities and
warrants to purchase
Interim
Securities & Warrants each quarter to a maximum of 19%. For example, during the first quarter following
common stock, pending
shareholder approval. the six-month deadline, the dividends will be increased from 11% to 13% if the
If shareholders approve, shareholder approval is not obtained. The warrant will have $0.01 exercise price
warrants are cancelled
Common and permit purchase up to 790 million shares of common stock. Should share-
and interim securities
convert to common Stock
stock. holder approval be obtained, the warrants will be cancelled.138 For a more detailed
description on the private preferred exchange process, see Figure 2.10.
Source: Citigroup, “Exchange Agreement,” 6/9/2009,
www.sec.gov, accessed 6/10/2009.
Public Preferred Exchange Offer
After the private preferred shareholders have exchanged their shares, Citigroup
will provide exchanges to its public preferred shareholders. Treasury will match
both the public and private exchanges dollar-for-dollar up to $25 billion at a
conversion rate of $3.25 per share. If shareholder approval is not obtained upon
closing, Citigroup will issue to Treasury interim securities that will be convertible
FIGURE 2.11
CITIGROUP PUBLIC PREFERRED EXCHANGE PROCESS
PUBLIC PREFERRED
SHAREHOLDERS
Public Public
Preferred Stock Preferred Stock
If shareholders have not approved

the exchange as of the closing If shareholders approve the
date, public preferred stock
Interim exchange as of the closing date,
converts to interim securities Securities public preferred stock converts
pending shareholder approval. directly to common stock.
Common Common
Stock Stock
Source: Citigroup, Exchange Agreement, 6/9/2009, www.sec.gov, accessed 6/10/2009.

to common stock upon approval.139 For a more detailed description on the public
preferred exchange process, see Figure 2.11.
Trust Preferred Security: A security
In addition to the exchange of up to $25 billion of its preferred shares obtained
that has both equity and debt char-
under CPP, Treasury will be exchanging the preferred stock it received under the acteristics, created by establishing a
TIP and AGP programs, to new trust preferred securities. According to Treasury, trust and issuing debt to it. A company
the new securities will have “greater structural seniority,” than the existing stock; would create a trust preferred security
for example, they will have a more senior claim in bankruptcy and will have a to realize tax benefits, since the trust is
higher priority to receive regular monthly interest payments.140 They will have an tax deductible.
annual coupon rate of 8% maturing in 2039 — meaning Citigroup will be paying
8% interest payments on Treasury’s investments.141 Citigroup will also create a new Coupon Rate: Interest rate to be paid
trust that will issue and sell the trust preferred securities to Treasury in exchange as a percentage of the face value of
for the TIP and AGP shares, as well as any remaining CPP shares that are not the security. For example, if a $100
security has an 8% coupon, the owner
exchanged to interim securities or common stock.142
of the security will receive $8 each
year for the life of the security.
Tax-Benefits Preservation Plan
On June 9, 2009, Citigroup announced that the Board of Directors had unani-
Ownership Change: Under U.S. income
mously adopted a tax-benefits preservation plan. Citigroup cited this as an effort tax law, an ownership change will
to protect Citigroup’s ability to utilize certain tax assets, such as operating loss occur if an owner that controls at
carry-forwards to offset future income.143 Under current tax law, should there be an least 5% of the company increases its
ownership change, Citigroup’s ability to offset future income with its current and holding by 50% or more over a rolling
recent losses for tax purposes could be eliminated or drastically reduced. three-year period.
In order to preserve the value of these potential tax benefits, Citigroup
must avoid certain events that might be deemed to be a change of ownership.
Accordingly, Citigroup’s plan contains two provisions that discourage the following
changes in ownership:144
• any person or group from becoming a 5% shareholder
• existing 5% (or more) shareholders from acquiring more than a specified num-
ber of additional shares of Citigroup
In an attempt to preserve the future tax benefits of the losses, Citigroup pre-
pared a strategy to dilute any increase in ownership that could jeopardize any of the
tax loss carry-forward. Citigroup’s strategy included declaring a stock dividend on
the interim securities and common stock allowing shareholders to purchase more
stock thus permitting the dilution of the stock to avoid a change in control, threby
protecting the tax benefits.
Bank of America Corporation

As of June 30, 2009, Treasury has provided no financing to Bank of America be-
yond its earlier CPP and TIP funding. Bank of America has received a total of $45
billion in three installments:
• CPP: $15 billion on October 28, 2008
• CPP: $10 billion on January 9, 2009
• TIP: $20 billion on January 16, 2009
On January 16, 2009, Treasury had announced the potential participation by

Bank of America in AGP. On May 7, 2009, Bank of America announced it was no
longer seeking such assistance.145 As of June 30, 2009, according to Treasury of-
ficials, the matter remains unresolved.
Use of Funds Reports

Under their TIP agreements, based on SIGTARP’s recommendations, both
Citigroup and Bank of America are required to submit a quarterly “use of funds
report.” The use of funds report must include the following information:146
• how TARP funds were used
• the implementation of internal controls for TARP funds
• compliance or non-compliance with restrictions on use of TARP funds
Use of Funds Report: Citigroup, Inc.

On May 12, 2009, Citigroup released its second use of funds report. The 60-
page “TARP Progress Report for First Quarter 2009,” describes the steps taken to
deploy TARP capital received.147 According to the report, Citigroup’s Special TARP
Committee (the “TARP Committee”) of senior executives had approved nearly $45
billion in initiatives to support the U.S. economy and expand the flow of credit.148
The report lists and describes its procedures for deployment of TARP capital as well
as executive compensation reductions.149 Included in Citigroup’s report is a list of
some of the internal controls put in place in connection with TARP-related lend-
ing. The internal controls include the following guidelines:150
• The TARP Committee may approve deployment of TARP-related capital for au-
thorized purposes, up to a certain maximum, without gaining further approval.
• Businesses are required to report quarterly to the TARP Committee on TARP-
related activities, the performance of any investments, and the benefit of any
activities to the flow of credit and the U.S. housing system.
• The TARP Committee will report quarterly to Citigroup’s board of directors on
the specific uses of TARP funds.
• Use of TARP capital must be reported to Head of Financial Planning and
Analysis with appropriate supporting materials to ensure effective monitoring.
Municipal Lending: Loans to city and • The committee will ensure that the Citigroup Finance Department has appro-
state governments. priate financial reporting concerning the uses of TARP capital.
• The TARP Committee will meet as often as required but no less than every
Supplier Financing: The purchase of quarter.
accounts receivables of small- and
medium-sized businesses.
The report details Citigroup activities, including approximately $8.25 billion in
TARP-related new loans for the first quarter between municipal lending, supplier
TABLE 2.19
financing, residential mortgages, and auto loans. Citigroup further reported that it
CITIGROUP USE OF FUNDS,
expanded its assistance to homeowners by modifying mortgages for approximately AS OF 6/30/2009 ($ BILLIONS)
80,000 homeowners with a total combined debt of more than $9 billion.151 Table Conforming Mortgage Securities $10.0
2.19 lists the TARP-related use of funds reported by Citigroup. Non-Conforming Mortgage Loans 8.2
U.S. Prime Residential Mortgage 7.5
Use of Funds Report: Bank of America Corporation Securities
On May 11, 2009, Bank of America submitted a four-page use of funds report Credit Cards 5.8
pursuant to its TIP agreement. Included in the report is a certification by the Chief Municipal Financing 5.0
Accounting Officer (“CAO”) that the required internal controls are in place, a Business and Personal Loans 2.5
description of the requirements stated in the contract, and a one-page discussion of Supplier Financing 2.0
the use of funds. Corporate Loan Securitization 1.5
According to the report submitted by Bank of America, the internal controls Student Loans 1.0
are described as “incorporated.”152 In contrast to Citigroup’s use of funds report, Residential Mortgages 1.0
Bank of America’s report does not provide any details of its lending or the amount Auto Loans 0.3
of lending that has occurred as a result of the increased capital provided by TARP. Total $44.8
Bank of America acknowledged that it did not segregate the $20 billion of TARP
Source: Citigroup, “What Citi is Doing to Expand the Flow of
funds on its balance sheet and included it as part of the operating capital, stating Credit, Support Homeowners and Help the U.S. Economy,
TARP Progress Report for First Quarter 2009,” 5/12/2009,
that, “since all TARP investment funds are part of our operating capital, they can- www.citigroup.com, accessed 6/1/2009.
not effectively be segregated and they cannot be ‘unspent.’”153 According to Bank of
America, the additional $20 billion was used to “bolster the company’s capital and
liquidity positions.”154 In its report, Bank of America listed the contract require-
ments as part of its internal controls relating to executive compensation, lobby-
ing, and other expenses. It did not provide detail as to how it is implementing the
internal controls.
ASSET SUPPORT PROGRAMS

Treasury, either on its own or in conjunction with the Federal Reserve, has cre-
ated three programs to support demand in financial markets for hard-to-value
assets and to restart the credit markets by supporting new loans: the Term Asset-
Backed Securities Loan Facility (“TALF”), the Public-Private Investment Program
(“PPIP”), and Unlocking Credit for Small Businesses (“UCSB”).
The Federal Reserve’s TALF program will provide up to $1 trillion in funding
Commercial Mortgage-Backed Securi- to institutions pledging asset-backed securities (“ABS”) as collateral. According
ties (“CMBS”): A financial instrument to Treasury, it will provide $80 billion of TARP funds to absorb losses on TALF
that is backed by a commercial real (although the Federal Reserve characterized Treasury’s commitment as up to $100
estate mortgage or a group of com- billion).155 As announced on May 1, 2009, TALF was expanded to include commer-
mercial real estate mortgages that are cial mortgage-backed securities (“CMBS”) as eligible collateral for TALF loans.156
packaged together. Through June 30, 2009, the Federal Reserve had facilitated five TALF subscrip-
tions: four subscriptions related to non-mortgage-backed ABS totaling approximate-
ly $28.5 billion in TALF loans, and one commercial mortgage-backed subscription
with no TALF loans issued.
In addition to the expansion of TALF, PPIP, as announced, included two sub-
programs, the Legacy Loans Program and the Legacy Securities Program. The
Legacy Loans Program was intended to utilize equity provided by Treasury and debt
guarantees provided by FDIC to facilitate purchases of legacy mortgage loans held
by banks; the program, however, has been shelved by FDIC. The Legacy Securities
Program utilizes equity provided by Treasury and debt potentially provided by
Treasury, through TARP, and/or the Federal Reserve, through TALF, to facilitate
purchases of legacy mortgage-backed securities (“MBS”) held by various financial
institutions.
Through the UCSB program, Treasury will purchase up to $15 billion in securi-
ties backed by Small Business Administration (“SBA”) loans.
Term Asset-Backed Securities Loan Facility
Program Summary
In November 2008, the Federal Reserve and Treasury announced TALF, under
which the Federal Reserve Bank of New York (“FRBNY”) would issue up to $200
billion in loans to make credit available to consumers and small businesses, backed
by $20 billion of TARP funds.157 Subsequently, in February 2009, Treasury and the
Federal Reserve announced that they were prepared to expand TALF up to $1 tril-
lion, which, according to Treasury, will include up to $80 billion of TARP funds.158
TALF is divided organizationally into two parts:
• lending program – originates loans to eligible institutions
• asset disposition facility – an SPV used by FRBNY to purchase and manage
any collateral surrendered by borrowers from the TALF lending program
FRBNY will manage both the lending program and the asset disposition facility. For more information on TALF mechan-
The funding for the lending program comes from FRBNY. According to Treasury, ics, see Section 2: “TARP Overview” of
the funding for the asset disposition SPV will first come from interest payments SIGTARP’s April Quarterly Report.
made by borrowers from the lending program, then from Treasury’s use of up to
$80 billion in TARP funds to purchase subordinated debt from the SPV, and finally,
from FRBNY non-recourse loans.
TALF Mechanics
As discussed in SIGTARP’s April Quarterly Report to Congress, borrowers in the
TALF lending program post ABS as collateral for non-recourse loans issued by
FRBNY. The eligibility of the TALF borrower and the TALF collateral is determined
through an application process.
Prior to SIGTARP’s April Quarterly Report, only certain newly issued ABS —
securities issued on or after January 1, 2009 — were eligible for TALF. The loans
supporting the ABS were limited to:
• auto, student, and credit-card loans
• equipment loans
• floorplan loans
• commercial and rental fleet leases Floorplan: Revolving lines of credit
used to finance inventories of items.
• receivables related to residential mortgage servicing advances (servicing advance
receivables)
Servicing Advance Receivables:
• small-business loans guaranteed by the SBA
Receivables related to residential
mortgage loan securitizations that
On May 1, 2009, the Federal Reserve added insurance premium finance loans grant the servicer first priority in any
and CMBS to the list of eligible ABS for TALF. Additionally, the Federal Reserve insurance or liquidation proceeds
announced the inclusion of select legacy CMBS for the July TALF subscription; from a loan, and, if those proceeds
this marks the first time that legacy securities will be included in TALF. Legacy se- are insufficient, grants the servicer a
curities are those securities issued before January 1, 2009, and account for a large first priority to general collections of
percentage of the ABS currently lingering on the books of financial institutions. For the related securitization.
a more detailed discussion about collateral eligibility, see the “Term Asset-Backed
Securities Loan Facility” discussion in Section 2: “TARP Overview” in SIGTARP’s Insurance Premium Finance Loan:
April Quarterly Report. Loan issued to small businesses so
they may obtain property or casualty
Once the collateral is deemed to be eligible, a haircut is assigned to the collater-
insurance.
al. Haircuts represent the borrower’s “skin in the game” — or the amount of money
the borrower must invest — and are required for all TALF loans in varying amounts
Haircut: Difference in the value of the
based on the type and riskiness of the ABS securing the TALF loan. Under TALF, collateral and the value of the loan
FRBNY will lend each borrower the amount of the purchase price of the pledged (the loan value is less than the col-
ABS minus the haircut, subject to certain limitations. The initial haircuts for lateral value).
non-mortgage-backed collateral as a percentage of collateral value are posted on
FRBNY’s website.
Much like haircuts, the interest rates for TALF loans are based on the loan
asset class, and most are quoted at a spread over LIBOR, which is a generally
accepted interest rate standard. Interest payments on the TALF loans are payable
monthly or quarterly, depending on the frequency of the interest payments on the
collateral. TALF loan interest rates may be fixed or floating, as determined by the
collateral, and are generally below what is currently available in the private mar-
kets. FRBNY posts the interest rates for TALF loans on its website.
Program Developments
As the TALF program matures, a number of updates have been introduced, which,
according to the Federal Reserve, serve three primary purposes:
• to maximize TALF’s impact on all sectors of the ABS market
• to provide transparency to investors and the marketplace
• to protect the taxpayers’ interests
Subsequent to SIGTARP’s April Quarterly Report, the following program-relat-

ed developments occurred and are discussed in greater detail in this section:
• Three additional TALF subscriptions (for a total of five) were conducted by
FRBNY.
• TALF-eligible collateral criteria were expanded to include: insurance premium
Subscription: Process of investors
finance loans and CMBS — both legacy and newly issued.
signing up and committing to invest in
• Two new nationally recognized statistical rating organizations (“NRSROs”) were
a financial instrument before the actual
added to provide ratings for CMBS only: Realpoint, LLC, and DBRS.
closing of the purchase.
• A proposed change to Standard & Poor’s (“S&P’s”) current ratings methodology
for CMBS could result in ratings downgrades for CMBS that might otherwise
have been eligible collateral for TALF loans.
• CMBS-specific haircut methodology was established.
• The role of collateral monitor for CMBS was created to act as another layer of
risk mitigation.
• Updated program mechanics were introduced for risk mitigation through man-
datory pre-payment of principal on loans collateralized by CMBS.
• The Federal Reserve hired a law firm to assist in the performance of a fraud risk
assessment for TALF.
TALF Subscription Activity

As of June 30, 2009, FRBNY had conducted five subscriptions of TALF. Four
of these subscriptions related to newly issued, non-mortgage-backed ABS (and
occurred in the first part of March, April, May, and June), and one subscription
related to newly issued CMBS (which occurred on June 16, 2009) for which there
was no activity.
TABLE 2.20
TALF LOANS BY ABS SECTOR, 3/2009 – 6/2009

(NON-MORTGAGE-BACKED COLLATERAL) ($ BILLIONS)
March April May June
ABS Sector 2009 2009 2009 2009 Total
Auto Loans $1.9 $0.8 $2.2 $3.3 $8.2
Student Loans — — 2.4 0.2 2.6
Credit Card Receivables 2.8 0.9 5.5 6.2 15.4
Equipment Loans — — 0.5 0.6 1.1
Floorplan Loans — — — — —
Small-Business Loans — — 0.1 0.1 0.2
Servicing Advance Receivables — — — 0.5 0.5
Premium Finance — — — 0.5 0.5
Total $4.7 $1.7 $10.6 $11.5 $28.5

As of 6/25/2009, $25.2 billion in TALF loans were outstanding. The 7/7/2009 subscription was for approximately $5.4 billion in
TALF loans.
Sources: FRBNY, “Term Asset-Backed Securities Loan Facility: Operation Announcement,” 6/2/2009, www.ny.frb.org/markets/
talf_operations_090602.html, accessed 6/3/2009. FRBNY, “Term Asset-Backed Securities Loan Facility: Operation Announcement,”
5/5/2009, www.newyorkfed.org/markets/TALF_operations_090512.html, accessed 5/29/2009. FRBNY, “Term Asset-Backed Securi-
ties Loan Facility: Operation Announcement,” 4/7/2009, www.newyorkfed.org/markets/TALF_operations_090407.html, accessed
5/29/2009. FRBNY, “Term Asset-Backed Securities Loan Facility: Operation Announcement,” 3/19/2009, www.newyorkfed.org/
newsevents/news/markets/2009/ma090319.html, accessed 5/29/2009. FRBNY, “Term Asset-Backed Securities Loan Facility: non-
CMBS,” 7/7/2009, www.newyorkfed.org/markets/TALF_operations.html, accessed 7/8/2009.
Subscriptions Using Non-Mortgage-Backed Collateral

As of June 30, 2009, FRBNY had facilitated four TALF non-mortgage-backed ABS
subscriptions, totaling approximately $28.5 billion. As Table 2.20 illustrates, TALF
lending for non-mortgage-backed ABS has grown since the initial subscription in
March 2009.
TALF loans issued for the purchase of ABS backed by student loans and ABS
backed by loans guaranteed by the SBA may have up to five-year maturities, as
opposed to up to three-year maturities for the non-mortgage-backed loans extended
thus far.
Subscriptions Using Mortgage-Backed Collateral

On June 16, 2009, FRBNY concluded the first subscription of TALF related to
newly issued CMBS. This was the first subscription with mortgage-backed securi-
ties as collateral. No loans were issued to borrowers during the subscription. Prior
to the subscription, during public remarks, the President of FRBNY indicated
that participation would be minimal because there had been little advance notice.
According to industry sources, for commercial real estate “it can take as long as six
months from the time a loan is originated to when it’s securitized.”159
Commercial Mortgage-Backed Securities

On May 1, 2009, the Federal Reserve issued a press release announcing the
expansion of TALF to include qualifying newly issued CMBS as eligible collateral
for TALF loans.160 On May 19, 2009, the Federal Reserve announced that legacy
CMBS would also be included.161 According to the Federal Reserve, “The CMBS
market came to a standstill in mid-2008. The inclusion of CMBS as eligible col-
lateral for TALF loans will help prevent defaults on economically viable commercial
properties, increase the capacity of current holders of maturing mortgages to make
Amortization Schedule: A complete additional loans, and facilitate the sale of distressed properties.”162
schedule of periodic blended loan pay- Commercial real estate mortgages that back CMBS are typically structured so
ments, showing the amount of principal that mortgage borrowers are required to make monthly payments consistent with
and the amount of interest in each a 20- to 30-year amortization schedule, but have a shorter term, which requires
payment so that the loan will be paid the borrower to make a bullet or balloon payment as the term reaches maturity. In
off over a certain time period. other words, the term of the mortgage may be five years, but unlike most residential
mortgages, at the end of the commercial real estate loans, most of the principal has
Term: The period of time assigned as not yet been repaid, leaving a very large final payment. As a result, most commer-
the lifespan of any investment.
cial mortgages are refinanced, that is, a new loan is sought at the end of the term.
Commercial lenders often make mortgage loans with the understanding that bor-
Bullet Payment: A one-time, lump-sum
rowers will seek to refinance when the bullet becomes due.
repayment of an outstanding loan, typi-
cally made by the borrower after very
As discussed in further detail in “TARP Tutorial: Securitization” in
little, if any, amortization of the loan. Section 2: “TARP Overview” of SIGTARP’s April Quarterly Report, securities is-
suance provides financial institutions a significant source of liquidity to make new
loans and refinance existing loans. When the CMBS market shut down last year,
commercial mortgage borrowers discovered that commercial lenders were not will-
ing to refinance commercial real estate loans. Because many borrowers are unable
to make the final bullet payment without financing, this has created a potential
crisis in the commercial real estate market.
Which CMBS Will Meet Collateral Eligibility Requirements?

In order to qualify as TALF collateral, newly issued CMBS and legacy CMBS must
meet a number of eligibility requirements. Some eligibility requirements are the
same for both newly issued and legacy CMBS:163
• Eligible CMBS must evidence an interest in a trust fund consisting of fully
funded mortgage loans and not other CMBS, other securities, interest rate swap
or cap instruments, or other hedging instruments.
• Eligible CMBS must have a credit rating in the highest long-term investment-
grade rating category from at least two TALF CMBS-eligible rating agencies and
must not have a credit rating below the highest investment-grade rating category
from any TALF CMBS-eligible rating agency.
• Eligible CMBS must entitle its holders to payments of principal and interest.
• Eligible CMBS must not be issued by an agency or instrumentality of the

United States or a Government-sponsored enterprise.
• Eligible CMBS must include a mortgage or similar instrument on a fee or lease-
hold interest in one or more income-generating commercial properties.
Some eligibility requirements for newly issued CMBS are similar to require-
ments for legacy CMBS with minor, but important, differences:
Newly issued CMBS:164

• Eligible newly issued CMBS must evidence first-priority mortgage loans that are
current in payment at the time of securitization.
• Eligible newly issued CMBS must not be junior to other securities with claims
on the same pool of loans.
• Each property underlying eligible newly issued CMBS must be located in the
United States or one of its territories.
Legacy CMBS:165
• Eligible legacy CMBS must not have been junior to other securities with claims
on the same pool of loans upon issuance.
• As of the TALF loan subscription date, at least 95% of the properties underlying
eligible legacy CMBS, by related loan principal balance, must be located in the
United States or one of its territories.
• If issued during or after 2005, eligible legacy CMBS must be “super senior” in
priority at the time of the TALF loan, meaning the holder is entitled to first pay-
ment. It became common practice in 2005 to sub-tranche (or further subdivide
cash flows), and TALF will only accept the most senior of these sub-tranches in
the highest rating category.166
For CMBS, the Federal Reserve has retained the services of a collateral
Collateral Monitor: Independent third
monitor to evaluate ABS to ensure that specific risks to the Federal Reserve and
party engaged by the Federal Reserve
Treasury are mitigated. For more on the role of the collateral monitor, refer to the
to assess the riskiness of the underly-
“Compliance and Fraud Prevention” discussion later in this section.
ing mortgage pools.
Nationally Recognized Statistical Rating Organizations for CMBS

The ratings assigned by NRSROs to CMBS are developed through methodologies
intended to provide a depiction of a financial instrument’s likelihood of default,
or riskiness. NRSRO methodologies often involve proprietary models, drawing on
basic assumptions about the MBS and comparisons of similarly structured invest-
ments, which may periodically be reviewed and could result in changes to ratings
issued by an NRSRO.
The ratings issued by NRSROs are integral to participation in the TALF pro-
gram. The terms and conditions of TALF have two distinct requirements related to
ratings for pledged collateral:
• At the time of subscription for the TALF loan, pledged collateral must have the
highest long-term investment-grade rating category (e.g., AAA) from two or more
TALF-eligible rating agencies.
• Collateral cannot have a credit rating less than the highest rating from any
TALF-eligible rating agency, nor can it be currently on review or on watch for
downgrade by any of the approved NRSROs.
If collateral pledged for a TALF loan does not possess the necessary ratings, the
borrower may not pledge that collateral as security for a TALF loan.
Prior to the expansion of TALF, the Federal Reserve would accept ratings from
S&P’s, Moody’s Investors Service, and Fitch Ratings for non-mortgage-backed
ABS. On May 19, 2009, the Federal Reserve announced the addition of two new
NRSROs to its list of acceptable NRSROs — DBRS and Realpoint, LLC — specif-
ically for their experience in dealing with CMBS.167 These five NRSROs are known
as TALF-eligible ratings agencies, because the ratings they issue may be relied on
for determining collateral eligibility. In light of TALF’s expansion to additional asset
classes, “the Federal Reserve will periodically review its use of NRSROs for the
purpose of determining TALF-eligible ABS.”168
Potential Downgrade of CMBS

On May 26, 2009, S&P’s proposed changes to the methodology it uses to rate
CMBS.169 The change in methodology will likely cause significant downgrades for
CMBS issued within the past three years, particularly with respect to the highest
long-term rating. It is being reported that, “25%, 60%, and 90% of the most senior
tranches of the 2005, 2006, and 2007 issuances, respectively, could be downgrad-
ed.”170 On June 26, 2009, S&P affirmed that it would adopt this stance.171 Because
of the eligibility requirement that collateral cannot have a credit rating less than
the highest rating from any major TALF-eligible rating agency, these downgrades by
S&P will render a significant portion of the legacy CMBS market ineligible for par-
ticipation in the TALF program. SIGTARP will follow these developments closely
and report on substantive changes to program design in subsequent reports.
Haircuts for Legacy CMBS Collateral

Similar to collateral requirements for other types of ABS collateral, TALF loans
secured by CMBS require borrowers to put up a portion of their own money, or
the haircut. The amount of the haircut is designed to reflect the inherent riski-
ness of the collateral and the potential for it to decline in value. Haircuts for newly
issued CMBS will be at 15%, increasing by one percentage point for each year of
TABLE 2.21
EXAMPLE CMBS EFFECTIVE HAIRCUT CALCULATION

CMBS Expected Par Market TALF Effective
Value Life Value Value Haircut % Haircut $ Loan Haircut
High Five Years $1,000 $1,000 15% $150 $850 15%
Medium Five Years 1,000 700 15% 150 550 21%
Low Five Years 1,000 400 15% 150 250 38%
additional average life over five years.172 Although also at 15%, haircuts on legacy
CMBS provide an additional technical-downside protection in that “the haircuts Par Value: The dollar value assigned
are based on a percentage of par value, but applied on a dollar basis to market to a security by the issuer.
prices.”173 For example, assume that a TALF borrower pledges legacy CMBS with
a par value of $1,000 for a TALF loan. The CMBS have an average life of five
years, which would require a 15% haircut from the borrower. If the legacy CMBS
were trading at full value, the borrower could get a loan for $850, putting up $150
(taking a $150 haircut). If, however, the legacy CMBS are trading at $700, the
borrower will only be able to secure a $550 TALF loan (the haircut is still $150 but
it now represents 21% of the now-lower market value). This formulation creates an
“effective haircut” that considers the proportion of the haircut to loan amount. The
lower the market value of the legacy CMBS, the higher percentage of market value
will be the haircut. See Table 2.21 for scenarios based on differing market values
for legacy CMBS.
Calculating haircuts in this manner acknowledges that legacy CMBS with large Weighted Average Life: The average
differences between par value and market value are generally likely to be experienc- number of years for which each dollar
ing performance problems with the underlying assets. This approach to calculating of unpaid principal on a loan or mort-
the required haircut minimizes the loan amount extended by the Federal Reserve gage remains outstanding.
and thus the potential exposure to loss.
Haircuts are designed to consider the weighted average life of a security, which
provides insight regarding how many years it will take to repay the principal. The
loans underlying a CMBS typically have a longer life than those of non-mortgage TABLE 2.22
ABS. The standard haircut for CMBS is 15%. To see the CMBS haircut percent-
CMBS HAIRCUT PERCENTAGES
ages across a range of average life for the underlying collateral, see Table 2.22.
Average Life (years)
0–5 6 7 8 9 10
Compliance and Fraud Prevention
15% 16% 17% 18% 19% 20%
As discussed in detail in Section 4: “Looking Forward: SIGTARP’s
Recommendations to Treasury” of SIGTARP’s April Quarterly Report, SIGTARP Source: FRBNY, “Term Asset-Backed Securities Loan Facility:
Terms and Conditions” 5/19/2009, www.newyorkfed.org/
made a series of recommendations regarding TALF program mechanics and fraud markets/talf_terms.html, accessed 5/19/2009.
prevention procedures. Subsequently, in two letters to SIGTARP, dated

May 5, 2009, and May 22, 2009, the Board of Governors of the Federal Reserve
responded to many of the recommendations from the past quarterly report and
outlined plans to implement procedures to address these concerns in subsequent
TALF operations. Those letters are included in Appendix G: “Correspondence

Primary Dealers: Banks and securi- Regarding SIGTARP Recommendations.”
ties broker-dealers that trade in U.S.
Government securities with the Federal Compliance Summary
Reserve Bank of New York for the Under TALF, the primary dealers are responsible for many of the compliance-relat-
purpose of carrying out open market ed activities, including performing due diligence regarding the eligibility of pledged
operations. There are currently 16 ABS and the TALF applicant. Specifically, each primary dealer is responsible for
primary dealers. applying its “Know Your Customer” / “Anti-Money Laundering” identification
program to each TALF borrower and making a representation to FRBNY that the
borrower is eligible for participation in TALF.174
For further detail regarding the primary CMBS Risk Mitigation through Collateral Monitoring
dealer’s role in TALF, see Section 2:
In addition to haircuts, which are predetermined, fixed percentages, FRBNY will
“TARP Overview” of SIGTARP’s April
conduct an actual valuation of any pledged collateral using adverse economic
Quarterly Report.
assumptions to determine the maximum price at which it will be willing to lend.
This may lead to lower TALF loan values than would have been issued relying
solely on haircuts for risk mitigation, and this practice is designed to ensure that
the total amount of money lent to the borrower will not exceed the total value of
the CMBS should the market continue to deteriorate. The process will also help to
deter collusion, in that a proposed price that is deemed too high may be rejected
by the Federal Reserve. FRBNY has retained the services of a collateral monitor to
assist with this collateral evaluation using certain eligibility requirements provided
by the Federal Reserve. According to FRBNY, the collateral monitor will also assess
the pledged collateral pool for diversity of loan size, geography, property type, and
borrower sponsorship to avoid over-concentration in any particular sector. The
collateral monitor will “estimate the value of the collateral under adverse eco-
nomic conditions, and the FRBNY will not make a loan that exceeds the stressed
valuation.”175
For example, a stressed valuation performed by the collateral monitor may
evaluate the performance of CMBS in light of increased unemployment. Any
increase to the unemployment rate would likely decrease the need for corporate
office space, thus increasing vacancies and reducing rent collection. Commercial
borrowers that recently took out a mortgage for the development of office space
may thus default on the mortgage because of less income, which subsequently
would harm the performance of CMBS. The collateral monitor’s evaluation may
show that CMBS with a market value of $600 under current economic conditions
would be worth $400 if the unemployment rate increases. Under this scenario,
a TALF borrower pledging the CMBS as collateral for a TALF loan would not be
granted a loan greater than the stressed value of $400. Specific information about
the Federal Reserve’s stress valuation of CMBS will not be made public.
On June 16, 2009, FRBNY announced the retention of Trepp LLC as its first
collateral monitor for the assessment of CMBS eligibility, both newly issued and
legacy. According to FRBNY, Trepp will “assist the New York Fed by providing valu-
ation, modeling, analytics and reporting.”176 FRBNY further clarified that it may
rely upon other firms as collateral monitors.
Risk Mitigation through Prepayment

The expansion of TALF includes additional protections to limit the Federal
Reserve’s exposure to losses from collateral declining in value and to encourage
borrowers to repay principal instead of abandoning the collateral at the end of the
TALF loan term.
Any remittance of principal for legacy CMBS must be used immediately to
pay down the TALF loan in proportion to the haircut of that loan.177 In the case of
CMBS, these principal remittances occur when a borrower prepays the mortgage,
entitling the security holder to payment beyond the security’s normal cash flow. For
example, if a TALF borrower obtained a three-year TALF loan with a 15% haircut,
the borrower would keep only 15% of any principal remittance, and the remain-
ing 85% would go to FRBNY to pay down the loan. In other words, if $1,000 of
principal was remitted, the TALF borrower would receive $150, and $850 would go
to FRBNY to pay down principal on the borrower’s TALF loan.
A second CMBS risk mitigation involves the use of interest payments received
by the holder of the CMBS. The interest generated by the CMBS is received by
FRBNY’s custodian and distributed in the following order:
• pay interest on TALF loan
• pay the TALF borrower subject to a cap
• pay down outstanding principal on the TALF loan
Assuming the interest received from CMBS is greater than interest payable on
the TALF loan, interest will be remitted to the TALF borrower until the following
limits are reached (on a five-year TALF loan) after which interest will go to pay
down remaining principal on the TALF loan:
• 25% of the haircut amount (annually) for the first three years of the TALF loan
• 10% of the haircut amount during the fourth year of the TALF loan
• 5% of the haircut amount during the fifth year of the TALF loan
For example, if a TALF borrower puts up a haircut of $100 for a five-year TALF
loan, the interest remitted to the borrower from the CMBS — above and beyond
the interest that is paid to the Federal Reserve for the loan — cannot exceed $25
for the first year, $25 for the second year, $25 for the third year, $10 for the fourth
year, and $5 for the fifth year. All payments more than these amounts go to the
Federal Reserve to repay the principal on the loan. In this way, the surrendering of
assets at the end of the TALF loan term will be discouraged as some principal will
have been repaid and the borrower will have retained some “skin in the game.”
Otherwise, a borrower could recoup its entire haircut and profit, and have no
incentive to pay off the loan, and reacquire the CMBS, at the end of the loan.
Fraud Risk Assessment

In a May 22, 2009, letter to SIGTARP, the Federal Reserve indicated that FRBNY
had retained the services of a law firm to assist in the performance of a compre-
hensive fraud risk assessment for TALF.178 According to the Federal Reserve, the
assessment “will include a review of fraud cases and investigation consultation
with a wide range of relevant law enforcement, government agencies, academics,
law firms and public and private investors and recommendations regarding addi-
tional measures, strategies or controls to reduce the potential fraud risk associated
with the program.”179 SIGTARP has met with FRBNY and a representative of the
law firm.
Additionally, FRBNY is developing an inspection program of the primary deal-
ers facilitating TALF loans to ensure they are performing the required due dili-
gence of collateral and borrowers.
Performance of ABS Markets

On June 4, 2009, the president and chief executive of FRBNY, William C. Dudley,
addressed the Securities Industry and Financial Markets Association and Pension
Real Estate Association’s Public-Private Investment Program Summit in New York
City regarding TALF.
During the remarks, Mr. Dudley stated, “TALF loans have accounted for a bit
more than half of total issuance volume of ABS (since the initial TALF subscrip-
tion)...this means that the TALF is helping to restart the market, rather than the
TALF being the market.”180 Additionally, Mr. Dudley noted that, “spreads on con-
sumer ABS have been coming down sharply from their peak levels reached late last
year. For example, the spreads on AAA-rated credit card ABS have narrowed from
a peak of about 600 basis points over LIBOR to slightly above 200 basis points
currently.”181
Legacy Assets: Also known as troubled

or toxic assets, legacy assets are real
estate-related loans and securities
Public-Private Investment Program (legacy loans and legacy securities)
On March 23, 2009, Treasury, in combination with FDIC and the Federal Reserve, that remain on banks’ balance sheets
announced the Public-Private Investment Program (“PPIP”), a $500 billion to and that have lost value, but are dif-
ficult to price due to the recent market
$1 trillion effort to improve the health of financial institutions holding legacy assets
disruption.
on their balance sheets and to restart frozen credit markets.182 As noted by FDIC,
these troubled loans and securities “have depressed market perceptions of banks
Market Value: Price at which a security
and impeded new lending.”183 PPIP is designed to purchase these legacy assets could be bought or sold.
from institutions through multiple Public-Private Investment Funds (“PPIFs”)
funded by Government and private-investor capital as well as desirable debt financ- Mark-to-market: Assets are carried at
ing. PPIP will initially focus on assets related to mortgages on residential and com- fair market value on a continual basis
mercial real estate.184 At program announcement, Treasury declared its intention to with periodic changes in the fair value.
commit up to $100 billion to PPIP and the expansion of TALF to legacy assets.185 Fluctuations in value are shown in the
On July 8, 2009, Treasury announced that it will initially invest up to $30 billion of corporate earnings.
equity and debt in nine PPIFs for the purchase of legacy securities.186
Illiquid market: A market in which
Understanding the Current Environment assets cannot be quickly converted to
cash.
PPIP’s success in meeting its goal of taking toxic assets off of banks’ books is
dependent on banks’ willingness to sell such assets. In order to assess the incentive
Fair Value: The price that would be
for banks to participate and sell their troubled assets, it is necessary to understand
received by the holder of that asset in
how institutions must account for these assets. Companies have traditionally held an orderly transaction.
certain assets — like stocks of other companies and asset-backed securities (“ABS”)
— on their books at market value. Accounting standards required banks to value Recognized: Gains or losses that occur
certain assets at the current market price (i.e., mark-to-market). Consequently, if when an asset is re-valued or sold.
the market value decreased, the company had to recognize a loss on its balance
sheet equal to the amount of the drop in value of the security, even though it has Financial Accounting Standards Board
not sold it. Similarly, if the market value increased, banks could recognize a gain, or (“FASB”): Established in 1973, FASB
profit, on their balance sheet, improving their capital position with no actual sale is the regulatory body responsible for
taking place. The mark-to-market methodology is a snapshot of value — it does not establishing rules for financial account-
capture the expected future earnings or the expected lifetime losses of the securi- ing and the reporting of public, private,
and not-for-profit companies. Those
ties.187 Illiquid and inactive markets make this fair value determination more dif-
standards “govern the preparation of
ficult. The recent turmoil in the economy caused the market value of ABS to drop
financial reports and are officially rec-
significantly, and, for some legacy securities, the market ceased to exist. As a result,
ognized as authoritative by the Securi-
institutions have had to recognize losses on their balance sheets reflective of the ties and Exchange Commission [“SEC”]
much lower market value of these assets. and the American Institute of Certified
The economic crisis focused scrutiny on the Financial Accounting Standards Public Accountants [regulators].”189
Board (“FASB”), which sets corporate accounting principles, and on mark-to- These standards are necessary for
market accounting. This scrutiny is based on the belief that the current market investors, creditors, and others to rely
is priced for a “fire sale,” and not an “orderly transaction” between “informed on the accuracy, transparency, timeli-
parties.”188 As a result, Section 133 of EESA mandated that the Securities and ness, and comparability of financial
Exchange Commission (“SEC”) conduct a study on mark-to-market account- statements.190
ing standards and whether it should be a governing accounting standard. On
December 30, 2008, the SEC provided a study resulting in recommendations

for improvement in mark-to-market rules relating to the application of fair
value measures in illiquid or inactive markets.191
There are arguments for and against mark-to-market accounting for legacy
assets. According to the Chairman of FASB, the mark-to-market accounting
is seen in the current environment by financial institutions and their trade
groups as “overstating the extent of losses and capital erosion and as a fac-
tor exacerbating the crisis.”192 On the other side of the argument, investors,
financial analysts, and other users of financial reporting “have urged [FASB]
not to suspend or weaken the current requirements, fearing that would enable
institutions to improperly avoid or delay the recognition of economic losses
and depleted capital.”193
Financial Accounting Standard 157-4 On April 9, 2009, FASB issued Financial Accounting Standard 157-4
(“FAS157-4”): On April 9, 2009, FASB (“FAS157-4”) to “establish a consistent definition of fair value”194 and provide
issued FAS157-4 to offer more clarity a framework for valuing assets in differing market conditions.195 FAS157-4
on valuing and accounting for assets offers further clarification on which type of assets (i.e., company stock) should
in an inactive market when pricing rely on market price and which assets (i.e., ABS) can use other valuation
represents distressed conditions. methods when the markets are not orderly. This clarification directly affects
the legacy assets being purchased by the PPIFs. FAS157-4 may allow banks
Legacy Loans: Underperforming real
to hold assets on their balance sheets at a higher value than the previous rule.
estate-related loans held by a bank
With the legacy assets now valued higher on their balance sheets, institutions
that it wishes to sell, but recent market
may be less willing to sell their assets to PPIFs because they would have to
disruptions have made difficult to price.
recognize as a loss (and a reduction in their capital), the difference between
Legacy Securities: Troubled real the value at which they held the asset on their books and the price at which
estate-related securities (residential they sold it.
mortgage-backed securities, commer-
cial mortgage-backed securities, and Program Details
asset-backed securities) lingering on In response to the economic crisis and the problems with legacy assets,
institutions’ balance sheets because Treasury has announced programs intended to help remove the troubled as-
their value could not be determined. sets from the balance sheets of banks and to restart illiquid markets. PPIP, as
originally announced, would provide between $500 billion and $1 trillion of
capital for the purchase of legacy assets through the following programs:
• Legacy Loans Program: PPIFs purchase legacy loans with TARP funds
and private-equity capital combined with FDIC-guaranteed debt.
• Legacy Securities Program: PPIFs purchase legacy securities using
TARP funds and private investment capital combined with TARP-issued
debt and/or optional leveraging from the expanded TALF for TALF-eligible
securities.
• Expanded TALF: The Federal Reserve has expanded eligible ABS to
include CMBS and is considering expansion to RMBS.
Legacy Loans Program

As announced, the Legacy Loans Program was designed to purchase hard-to-
value real estate-related loans from financial institutions.196 In the Legacy Loans
Program, Treasury would form PPIFs with private investors and would match the
private investment dollar-for-dollar (i.e., for every $1 invested by the private inves-
tor, Treasury would also invest $1). FDIC would provide a debt guarantee of up to
a 6-to-1 leverage ratio (i.e., debt-to-equity ratio) on the pool of loans. The allowed
amount of leverage would be predetermined by FDIC after an independent, third-
party analysis of the loans.
For more information on the Legacy Loans
On June 3, 2009, FDIC announced that, although it is continuing to develop Program, see Section 2: “TARP Overview”
the Legacy Loans Program, the program would be postponed indefinitely. It cited in SIGTARP’s April Quarterly Report.
recent successful capital-raising efforts by financial institutions as reflecting
“renewed investor confidence in our banking system.”197 SIGTARP will provide
updates when more information on the Legacy Loans Program is available.
Legacy Securities Program

According to Treasury, “the Legacy Securities Program is intended to restart the
market for legacy securities, allowing banks and other financial institutions to
free up capital and stimulate the extension of new credit.”198 Legacy securities are
ABS supported by a pool of real estate-related loans, and for the purposes of PPIP,
issued before January 1, 2009.199 Private investors and Treasury will co-invest to
purchase these assets from banks, insurance companies, mutual funds, pension
funds, and any other eligible institutions.200
In the Legacy Securities Program, Treasury will invest equity alongside pri-
vate investors in a PPIF. In addition to the equity investment, Treasury will also
offer debt financing equal to or double the amount of the private investment.
Furthermore, Treasury and the Federal Reserve will allow the PPIFs to obtain ad-
ditional financing, up to certain limits, from the Federal Reserve’s TALF program
for those assets that are eligible for TALF (currently only CMBS).201
Expanded TALF
The Federal Reserve, as described in the previous “Term Asset-Backed Securities
Loan Facility” discussion in this report, has expanded its eligible asset classes to
include legacy CMBS. This expansion allows, but does not require, participants in
PPIP’s Legacy Securities Program to also participate in TALF, subject to applicable
haircuts. According to OFS, “haircuts will be increased so that the combination
of Treasury- and TALF-supplied debt will not exceed the total amount of TALF
debt that would be available leveraging the PPIF equity alone.”202 See the previous
“Term Asset-Backed Securities Loan Facility” discussion in this section for more
information on the mechanics and the eligible collateral of TALF. Treasury and
the Federal Reserve are continuing to assess whether to expand TALF to new and
legacy RMBS, but, as of June 30, 2009, no final decision has been made.
FIGURE 2.12
PPIP ASSET/CASH FLOW Legacy Securities Program Process

The following steps detail the process for participation in the Legacy Securities
Program and Figure 2.12 details the flow of cash and assets:
OWNERSHIP/ LENDERS
INVESTORS
1. Fund managers apply to Treasury to participate in the program.
Treasury Treasury
Fund Manager Third Party (TALF) 2. Approved fund managers must raise necessary private capital for the PPIF.
Private Investors 3. Treasury matches the capital raised, dollar-for-dollar (up to a predetermined
maximum amount, currently $1.1 billion).
EQUITY DEBT
– Treasury also receives warrants so it can further participate if profits are
PPIP earned by the PPIF.
4. Fund managers can borrow additional money from Treasury.
MBS CASH – Managers can borrow 50-100% of the total equity investment (currently
$1.1 billion or up to $2.2 billion).
SELLER BANK
– If managers take no more than 50% financing from Treasury, PPIF may re-
ceive TALF loans for TALF-eligible assets (subject to leverage limits) or other
Sources: OFS, “Legacy Securities Public-Private Investment third-party debt.
Partnership Summary of Indicative Terms and Conditions,”
received from SIGTARP 7/1/2009; OFS, “Public-Private 5. Fund manager purchases and manages the legacy securities and provides
Investment Program: White Paper,” 3/23/2009, www.treas.gov,
accessed 6/15/2009. monthly reports to Treasury.
There are many participants in the operation and oversight of PPIP. Treasury,
in particular, has many roles. Table 2.23 describes the participants and their
respective roles.
TABLE 2.23
PPIP PARTICIPANTS AND ROLES

Role Participant Description
Private Investor Invests in a PPIF to purchase legacy assets
Treasury Provides an equity investment matching the contributions made by the private investors and fund manager
Investor
Required to invest at least $20 million in the PPIF — limited to 9.9% ownership of the total capital provided by
Fund Manager
private investors
Treasury Lends PPIF either 50% or 100% of the value of the total equity investment
Lender
Third Party Lends to PPIF — can be private lender or FRBNY via TALF — subject to leverage caps
PPIF Manager Fund Manager Will make investment decisions and manage the operation of the PPIF — paid management fees
Custodian Provides reports on the PPIF and provides asset test on the purchased securities
Administrator
Valuation Agent Values assets purchased by the PPIF
SIGTARP
Oversight Treasury-OFS Allows access to all personnel and records involved in the activities of the PPIF
GAO
Source: Treasury, “Letter of Intent and Term Sheet,” 7/8/2009, www.financialstability.gov/docs/S-PPIP_LOI_Term-Sheets.pdf, accessed 7/8/2009.
PPIF Manager Selection

According to Treasury officials, fund manager selection was a multistep process
that began with the initial applications; followed by minimum criteria review; then
final committee review, interviews, and comparison; and culminated in the selec-
tion of fund managers. All of the applicants were reportedly evaluated by a commit-
tee of five voting members and two non-voting members.203
Treasury reported that it initially received 141 applications and narrowed them
down to 104 applicants based on incomplete or duplicative applications and other
eligibility criteria. The 104 applicants were then compared against the minimum
criteria. Failure to meet any two of the five criteria reportedly disqualified an ap-
plicant. According to Treasury officials, these criteria included, but were not limited
to:204
• a demonstrated ability to raise $500 million of private capital

• a demonstrated experience investing in eligible assets
• having $10 billion in eligible assets under management
• a demonstrated capacity to manage the fund consistent with Treasury’s goals for
the program
• being headquartered in the United States
After eliminating the non-conforming applicants and dropouts, the committee

narrowed the possible fund managers to 11 for further review, interviews, and rank-
ing.205 Upon completion, Treasury announced the following fund managers:206
• AllianceBernstein, L.P. and its sub-advisors Greenfield Partners, LLC, and

Rialto Capital Management, LLC
• Angelo, Gordon & Co., L.P., and GE Capital Real Estate
• BlackRock, Inc.
• Invesco Ltd.
• Marathon Asset Management, L.P.
• Oaktree Capital Management, L.P.
• RLJ Western Asset Management, L.P.
• The TCW Group, Inc.
• Wellington Management Company, L.L.P.
In addition to the 9 announced fund managers, 10 leading small-, veteran-, mi-

nority-, and women-owned businesses will provide “meaningful” partnership roles
to the PPIFs.207 These roles include, but are not limited to, asset management,
capital raising, broker-dealer, investment sourcing, research, advisory, cash manage-
ment, and fund administration.208
Terms Agreed to by Fund Managers

On July 8, 2009, Treasury announced the terms of its equity and debt term sheets
with the newly selected PPIF managers that will work to “generate attractive
returns” through “long-term opportunistic investments.”209 The debt term sheet set
forth three financing options with respective leverage limits for the PPIF. The PPIF
will purchase originally AAA-rated CMBS and non-agency RMBS issued prior to
2009 and other approved temporary investments.210 The three financing options
are:
1. equity matching, 100% debt financing as a percentage of total equity, and no

additional debt financing is allowed
2. equity matching, 50% debt financing as a percentage of total equity, and a lever-
age cap for borrowing from a third party at 5:1
3. equity matching, 50% debt financing as a percentage of total equity, and lever-
age from the Federal Reserve through TALF at an amount in combination with
Treasury that will “not exceed the total amount of TALF debt that would be
available leveraging the PPIF equity alone”211
Temporary Investments: For the pur-
poses of PPIP, they are cash, Treasur- A fund manager has several options to leverage PPIF funds, depending on
ies, money market mutual funds, and whether it seeks to purchase TALF-eligible securities. For example, if a fund man-
interest rate hedges. ager raises $50 in equity and receives a matching $50 Treasury equity investment,
it has three different options to seek Government leverage to buy MBS:
1. The fund manager can borrow 100% of equity ($100) from Treasury as a non-
recourse loan and buy a total of $200 worth of MBS. Under this option, the
fund manager may not borrow from TALF.
2. The fund manager can borrow nothing from Treasury and apply the full $100
of equity to TALF as a haircut. If a particular MBS has a 20% haircut, the fund
manager could obtain a maximum non-recourse loan from FRBNY of $400 and
purchase $500 of MBS.
3. The fund manager can borrow 50% of the total equity ($50) from Treasury un-
der PPIP and seek additional funding from TALF to purchase MBS. However,
because of the prohibition of leverage-on-leverage in the interaction between
PPIP and TALF, the total leverage for the PPIF (using both Treasury and TALF
debt) is based on the original equity. In this example, because the equity is
$100, the maximum leverage at a 20% TALF haircut is $400. Because the PPIF
fund manager has already received a $50 loan from Treasury through PPIP, the
maximum additional leverage that it can receive from TALF is an additional
$350, giving the fund manager the ability to purchase $500 worth of MBS. As
the program was originally designed, the PPIF would have been able to apply
both the PPIP debt and equity ($150 total) to TALF as the haircut, and in this
example, would have been able to receive a $600 loan under TALF and thus
able to purchase $750 worth of MBS.
If a PPIF is going to use third-party debt, the PPIF must form a subsidiary to
finance, acquire, and hold the assets. Any recourse from the third-party debt is
restricted to the subsidiary, and no further actions can be taken against the PPIF or
its investors.
As the PPIFs begin to have normal operations, the fund managers will be
required to submit an audited annual report, unaudited quarterly reports, monthly
reports, and in some cases, weekly reports on behalf of the PPIFs. In the monthly
reports the PPIF is required to report on the following: CUSIP: Unique identifying number
assigned to all registered securities in
• PPIF holdings (including CUSIP or ISIN, security description, par value, cost, the United States and Canada.
fair market value, and accrued income)
International Securities Identification
• purchases and sales
Number (“ISIN”): Unique identifying
• capital activity including contributions and withdrawals of securities and cash
number assigned to all internationally
• a summary of the change in the fair market value of the PPIF’s investments
traded securities.
• performance data (including 1-month, 3-month, year-to-date, latest 12-months,
since inception [cumulative] and since inception [annualized]) Solvency: A company’s ability to pay its
• management discussion and analysis of the partnership’s investment activities debts with available cash.
• an analysis of current market conditions
Asset Coverage Test: For the purposes
All PPIFs are required to have continuous testing of their solvency and liquid- of PPIP, a requirement that the total as-
ity. These tests include an asset coverage test, and, for PPIFs that choose debt sets of a PPIF be proportionally larger
financing, a leverage ratio test. The asset coverage test requires total assets to than total debt. The asset coverage
be proportionally larger than total debt, and the leverage ratio test, if applicable, ratio is calculated as: ([market value
requires the total debt to be proportionally larger than the total equity. Based on the of PPIF assets] + [market value of any
assets held by a subsidiary] – [any
requirements, a PPIF choosing 50% leverage must have an asset coverage ratio of
debt associated with those subsidiary
at least 225% (i.e., if the PPIF has $100 in debt, then the asset value of its portfolio
assets]) / total debt.
must be at least $225). On the other hand, if the PPIF chooses 100% debt financ-
ing, then it must have an asset coverage ratio of at least 150% (i.e., if the PPIF has
Leverage Ratio Test: For the purposes
$100 debt, then the asset value must be at least $150). Those PPIFs that do not of PPIP, the application of the leverage
comply with the standards set by the asset coverage test or the leverage test cannot cap to determine if a PPIF exceeds its
purchase any more assets until the PPIF is in compliance and must submit weekly debt limit. Calculated as: total debt /
reports until the PPIF is in compliance. To determine the value of the assets, net assets.
Treasury will employ a valuation agent that will report to Treasury its estimate of
the value of the assets in the funds. Net Assets: The value of all of the
assets minus any debt associated with
PPIP Safeguards and Conflict Mitigation those assets.
As SIGTARP noted in its April Quarterly Report, there are numerous potential
opportunities for fraud, waste, and abuse in PPIP. On July 8, 2009, Treasury issued
updated guidance on safeguards put in place to protect the taxpayer against losses.
Table 2.24 describes some of the safeguards included in the PPIP debt and equity
agreements. In addition, Treasury announced specific conflict standards for PPIF
managers. Table 2.25 describes these conflicts and the possible mitigating efforts
For more information on PPIP vulner-
put in place by Treasury to protect its investment in the PPIFs.
abilities and SIGTARP’s recommenda-
tions, see Section 4: “Looking Forward:
SIGTARP’s Recommendations to Treasury”
in SIGTARP’s April Quarterly Report. TABLE 2.24
PPIP SAFEGUARDS
PPIF must set aside three months of expected interest pay-
Interest Reserve
ments to Treasury.
Investors cannot withdraw investment. The PPIF is sup-
Investor Withdrawal Prevention
posed to be a long-term investment.
Fund managers must have at least $20 million invested
Fund Manager Investment so they have some “skin in the game.” Investment cannot
exceed 9.9% of the total private investment.
A valuation agent is responsible for calculation of market
value of eligible assets and temporary investments on a
Independent Valuation
monthly basis. The same valuation agent will be used for all
of the PPIFs.
Leverage Cap There is a limit to the amount of debt a PPIF can take on.
When distributions are made, there is a defined order to
Distribution Waterfall ensure repayment of Treasury debt prior to distributions to
private investors.
Fund managers are required to develop, implement, and
Ethics
monitor an ethics standard.
Fund managers are required to develop, implement, and
Conflict Standards
monitor a conflicts standard.
In addition to the PPIF transactions, the fund manager and
Eligible Asset Watch List its affiliates must disclose information on all transactions
with eligible assets outside of the PPIF.
Leverage Cap: For the purposes of Source: Treasury, “Letter of Intent and Term Sheet,” 7/8/2009, www.financialstability.gov/docs/S-PPIP_LOI_Term-Sheets.pdf,
PPIP, a limit to the amount of debt a accessed 7/8/2009.
PPIF can assume based on its equity.

Calculated as: total debt / net assets.
TABLE 2.25
PPIP CONFLICTS OF INTEREST AND MITIGATING EFFORTS

PPIF manager may have proprietary interest and/or interest for other clients in eligible collateral which could lead
Conflict:
to a more favorable treatment of non-PPIF clients over PPIF investors and Treasury.
Shall comply with act, including, but not limited to: anti-fraud provisions, rules regarding record
Investment Advisors Act of
keeping, contracts, advertising, custody of client funds and assets, disclosure and transpar-
1940
ency.
Shall adopt a fair trade allocation policy that requires a pro rata or comparably equitable allo-
Allocation and Valuation Pricing
cation of trades and investment opportunities between the PPIF and non-PPIF funds that invest
Policy
in eligible assets.
Co-investment Required to invest a minimum of $20 million.
Acknowledge that it owes Treasury and the private investors fiduciary duties of loyalty and
Fiduciary Duty
care when performing services for the PPIF.
Record Access Treasury and SIGTARP have access to books and records of the PPIF.
Treasury and SIGTARP can conduct an annual or ad hoc review of compliance with these poli-
Mitigating Reviews
cies.
Efforts:
Will establish a list of securities in which the PPIF manager, its clients, and/or its named affili-
Eligible Assets Watch List
ates hold positions, or they are analyzing for current investment.
Shall disclose to Treasury all actual and potential conflicts of interest and who within the PPIF
Disclosure of Conflicts
manager’s firm will have access to PPIF investment and strategy decisions.
Disclosure of Beneficial Owner-
Will disclose to Treasury all information regarding the beneficial owners of equity in a PPIF.
ship Interest
Disclosure of Top 10 PPIF
Will report to Treasury and SIGTARP quarterly on the 10 largest positions of the PPIF.
Positions
Will comply with “Know Your Customer” regulations, Office of Foreign Asset Control statutes
Investor Diligence
and regulations, and all relevant Federal securities screening laws.
Internal controls will be audited annually, with reports submitted to Treasury and SIGTARP. Valu-
Independent Oversight
ation and return calculations and methodology will also be independently verified.
Conflict: PPIF manager may have conflicts with named affiliates holding or servicing eligible assets. The PPIF manager
could have control over the affiliate’s decisions, or the affiliate could have control over the PPIF manager’s
decisions.
All controls from above.
May not acquire or sell eligible assets to:
(1) fund manager
Transaction Restrictions (2) sub-advisors of the fund manager
(3) any named affiliates of the fund manager
Mitigating (4) any other PPIF
Efforts:
Disclosure regarding asset Cannot inform PPIF investors or any other fund managed by the PPIF manager of potential
acquisition acquisitions except to the extent necessary to facilitate a transaction for the PPIP
Disclose quarterly when any affiliates:
Quarterly Disclosure (1) service eligible assets
(2) invest in any of the same categories of securities
PPIF manager may have conflicts with fund raisers and broker-dealer relationships. These relationships could have
Conflict:
revenue-sharing relationships which could improperly influence the decisions of the PPIF manager.
All controls from above.
Mitigating (1) no trades for PPIF allowed by broker-dealer affiliates
Efforts: Relationship Restrictions (2) must disclose any such relationships and the terms of the relationship
(3) compliance department to put controls in place to prohibit, monitor, and test for such transactions
Continued on next page.
PPIP CONFLICTS OF INTEREST AND MITIGATING EFFORTS (CONTINUED)
Conflict: PPIF managers may have personal conflicts of interest.

Mitigating
Personal Conflicts Policies All related parties, employees, and the like subject to conflict rules and code of ethics
Effort:
Conflict: The PPIF manager may engage in asset crossing, flipping, or round tripping.
All controls from above
Mitigating (1) best price and/or best execution to be achieved

Efforts: (2) no crossing trades
Transaction Restrictions
(3) no purchases with the intent of selling within one week
(4) no resale of assets within limited window of time of purchase
Conflict: PPIF manager could be involved in other recovery-related programs.
Mitigating Must disclose to Treasury activities such as asset acquisition, disposition, or management
Disclosure Requirement
Efforts: services to the Federal Reserve or FDIC
Conflict: PPIF manager may improperly represent its relationship with Treasury.
Mitigating
Marketing Restrictions Cannot advertise its relationship with Treasury except for its participation in PPIP
Efforts:
Source: Treasury, response to SIGTARP draft report, 7/13/2009.
Asset Crossing: Buying or selling Round Tripping: Buying an asset

assets from affiliates, either directly from an entity and reselling the
or through third parties. asset back to the entity or its
affiliates.
Asset Flipping: buying assets with
the intention of reselling these
assets in the short term.
Unlocking Credit for Small Businesses

7(a) Program: SBA loan program
guaranteeing a percentage of loans for On March 16, 2009, Treasury initiated the Unlocking Credit for Small Businesses
small businesses that cannot otherwise (“UCSB”) program to encourage banks to extend more credit to small busi-
obtain conventional loans at reasonable nesses.212 Under the UCSB program, Treasury announced that it would purchase
terms. up to $15 billion in securities backed by pools of Small Business Administration
(“SBA”) loans from two SBA participating programs: the 7(a) Program and the
504 Community Development Loan 504 Community Development Loan Program. According to Treasury, the UCSB
Program: SBA program combining program was designed to provide banks the liquidity necessary to start writing new
Government-guaranteed loans with small-business loans again.213 As of June 30, 2009, Treasury had not expended any
private-sector mortgage loans to
funds under the UCSB program.
provide loans of up to $10 million for
community development.
AUTOMOTIVE INDUSTRY SUPPORT PROGRAMS

For the U.S. automotive industry, the quarter ending June 30, 2009, was domi-
nated by the bankruptcy filings of Chrysler and General Motors (“GM”). TARP is
playing a key role in the financing of these companies as they undergo and emerge
from bankruptcy, as well as in the support of critical related industries.
Through TARP, Treasury has initiated three distinct programs to support
the automotive industry: the Automotive Industry Financing Program (“AIFP”)
to assist automakers and their financing arms,214 the Auto Supplier Support
Program (“ASSP”) to assist the firms that supply them,215 and the Auto Warranty
Commitment Program (“AWCP”) to support consumer confidence in these compa-
nies.216 Investments in these three programs are summarized in Table 2.26.
TABLE 2.26
TARP AUTOMOTIVE PROGRAMS FUNDING COMMITTED

AS OF 6/30/2009 ($ BILLIONS)
Bankrupt Entities Non-Bankrupt Entities
Chrysler
Chrysler GM Financial GMAC Total
Pre-Bankruptcy:
AIFP $4.5a $19.4 $1.5 $13.4 $38.8
ASSP 1.5b 3.5c – – 5.0
AWCP 0.3 0.4 – – 0.6
$6.3 $23.3 $1.5 $13.4 $44.4
In-Bankruptcy
(DIP Financing):
AIFP $3.8d $30.1 – – $33.9
Post-Bankruptcy
(Working Capital):
AIFP $6.6e – – – $6.6
Subtotals by
Program:
AIFP $79.3
ASSP 5.0
AWCP 0.6
Total $16.7 $53.4 $1.5 $13.4 $85.0

a
$500 million of this commitment was never funded.
b
Commitment was decreased to $1 billion on 7/8/2009.
c
Commitment was decreased to $2.5 billion on 7/8/2009.
d
$1.9 billion of this commitment was never funded.
e
Approximately $4.7 billion of this commitment was provided in working capital; approximately $2 billion was used to pay senior
secured lenders.
Sources: Treasury, Transactions Report, 7/2/2009; Treasury, Transactions Report, 7/10/2009; Treasury, response to SIGTARP draft,
7/13/2009.
TABLE 2.27
AIFP FUNDING COMMITTED TO AUTO COMPANIES

AS OF 6/30/2009 ($ BILLIONS)
Institution Total
Chrysler $14.9
GM 49.5
Chrysler Financial 1.5a
GMAC 13.4
Total $79.3
Notes: Does not include funds invested under ASSP or AWCP. Numbers affected by
rounding. Data as of 6/30/2009.
a
As of 6/30/2009, $130.8 million of principal payments related to the Chrysler Financial
loan had been repaid.
Sources: Treasury, Transactions Report, 7/2/2009; Treasury, response to SIGTARP data

call, 7/8/2009.
Automotive Industry Financing Program

For more information regarding the The Automotive Industry Finance Program (“AIFP”), under which Treasury invests
background of AIFP, refer to the AIFP in automakers and their financial arms, was created on December 19, 2008, with
discussions in SIGTARP’s Initial Report the stated goal of preventing a significant disruption to the American automotive
and SIGTARP’s April Quarterly Report.
industry that would pose a systemic risk to financial market stability and have a
negative effect on the U.S. economy.217
Status of Funds
As of June 30, 2009, Treasury had committed, through AIFP, $79.3 billion to two
automakers and their two financial affiliates of which, $130.8 million has been
repaid.218 Treasury has received $160 million in dividends and $202 million in
interest payments from its AIFP investments.219 Table 2.27 summarizes Treasury’s
committments under AIFP.
Auto Supplier Support Program

Because of the rapid decline in auto sales, many auto parts suppliers are struggling
to access credit, and they face uncertainty regarding the future of their businesses.
In a typical sales cycle, auto suppliers ship parts to manufacturers 45 to 60 days
before receiving payment. The suppliers typically fund operations by borrowing
from banks, using their receivables as collateral while payments are outstand-
ing. However, the current credit crisis has made it very difficult for suppliers to
get loans from banks. According to Treasury, the Auto Supplier Support Program
(“ASSP”) will provide select suppliers with access to Government-backed protec-
tion that guarantees money owed to them will be paid.220
Program Goals
On March 19, 2009, Treasury announced the formation of ASSP to provide up to
$5 billion in financing to suppliers to the U.S. auto manufacturing industry. The
program was designed to give suppliers confidence to continue shipping parts, pay-
ing employees, and maintaining operations.221 Although all domestic auto compa-
nies were eligible to participate, Chrysler and General Motors are the only two that
decided to take advantage of the program. However, any domestic supplier that
ships parts to Chrysler or General Motors is also eligible, as well as any receivables
for goods shipped after March 19, 2009, purchased on qualifying terms between
an eligible manufacturer and an eligible supplier. The auto companies can select
the suppliers and specific receivable accounts that will be included in the program.
Selected suppliers sell their receivable accounts into the program at a small dis-
count, as a fee for participation.222
Status of Funds
On April 9, 2009, Treasury executed agreements to fund $5 billion under ASSP.
Both Chrysler and General Motors created special purpose vehicles (“SPVs”) to Special Purpose Vehicle (“SPV”): An
receive these funds. Chrysler Receivables SPV, LLC received a commitment for off-balance sheet legal entity that holds
$1.5 billion and GM Supplier Receivables, LLC received a commitment for $3.5 the transferred assets presumptively
billion.223 Table 2.28 summarizes the ASSP funds that were committed as of beyond the reach of the entities provid-
June 30, 2009. ing the assets (e.g., legally isolated).
Because most suppliers have been paid during the course of the companies’
bankruptcies, a diminished amount of activity is expected under the program going
forward. Under the original loan agreements for each SPV, the Treasury commit-
ments could be decreased if the outstanding amounts did not exceed the commit-
ments made on June 30, 2009. At the request of Chrysler and GM, on
July 8, 2009, the original commitments were reduced to $1.0 billion and
$2.5 billion respectively.224
TABLE 2.28
ASSP FUNDING COMMITTED AS OF 6/30/2009 ($ BILLIONS)

Original
Institution Commitment
Chrysler Receivables SPV, LLC $1.5
GM Supplier Receivables, LLC 3.5
Total $5.0
Notes: Numbers affected by rounding. Data as of 6/30/2009. Data does not include reductions
that took place on 7/8/2009.

Auto Warranty Commitment Program

How to maintain consumer confidence during their respective restructuring
periods was a major issue for both Chrysler and GM. With the long-term futures
of Chrysler and GM in doubt, there were concerns that some consumers would
be reluctant to purchase vehicles because the manufacturers might not be able to
honor the warranties. The Auto Warranty Commitment Program (“AWCP”) was
created to alleviate these concerns and encourage consumers to continue buying
Chrysler and GM vehicles.
Program Goals
On March 30, 2009, Treasury announced the creation of AWCP to give retail
consumers confidence that their automobile warranties would be honored. The
program covers all warranties on new vehicles purchased during the participating
manufacturers’ restructuring period. Any retail consumer who purchases a new
vehicle during this time will be automatically eligible for the program. According to
Treasury, the program is designed to encourage the continued viability of restruc-
turing auto companies by mitigating consumer uncertainty and increasing vehicle
sales.225
Status of Funds
Prior to Chrysler’s bankruptcy filing on April 30, 2009, Treasury made $280 mil-
lion available through an SPV to backstop warranties on new car sales. Similarly,
Treasury made $361 million available to GM prior to its bankruptcy.226 Table 2.29
summarizes the funds that have been invested under AWCP.
As of June 30, 2009, the AWCP remains operational but Treasury has stated
that the funds are not expected to be used by the manufacturers. Both companies
are continuing to honor consumer warranties while in bankruptcy. Treasury expects
that after Chrysler and GM emerge from bankruptcy, their respective SPVs will
refund the committed funds back to Treasury.227
TABLE 2.29
AWCP FUNDING COMMITTED AS OF 6/30/2009 ($ MILLIONS)

Investment
Institution Amount
Chrysler Warranty SPV LLC $280
GM Warranty LLC 361
Total $641

TARP TUTORIAL: BANKRUPTCY
As reported in SIGTARP’s April Quarterly Report, Chrysler and GM were given 30- and 60-
day extensions, respectively, to submit revised restructuring plans to the President’s Auto
Task Force. After the April Quarterly Report, both manufacturers were unable to obtain
the voluntary stakeholder concessions needed to implement restructuring plans that
would achieve long-term viability; each company thus filed for bankruptcy as a means
to bring those plans to fruition. A basic tutorial on the bankruptcy process is provided
below.
For more information on the President’s Auto Task Force see Section 2: “TARP
Overview” in SIGTARP’s April Quarterly Report.
Alternatives Available to a Financially Troubled Business Insolvent: A company’s total liabilities

When a company’s total liabilities are greater than its assets, it is considered insolvent (debts) are greater than its total
assets.
and it has several options:
• pursuit of operational solutions such as merging with another company, refinancing

business loans, or cutting costs
• dissolution of the company
• negotiations or some form of out-of-court arrangement with its creditors to pay off
debts
• bankruptcy
Dissolution
Among the alternatives available to financially troubled businesses (i.e., businesses that
Liquidation: The sale of a company’s
are or may become insolvent) is dissolution. Dissolution is the orderly liquidation of a
assets in order to pay off outstanding
company’s operations under state law and involves the liquidation of the company’s
debts with the remaining amount being
assets to pay, or partially pay, debts. Depending upon the nature of the business (e.g., distributed to shareholders. Once this
partnership, limited partnership, limited liability company, corporation, etc.), dissolution process is complete, the company
may not fully release the business from its liability for debts not paid in full. goes out of business.
Creditor: A person or entity that is

Negotiations with Creditors
owed money by another person or
If a business is in financial trouble but wishes to continue operations, it may first request entity.
a meeting with creditors, the people or entities to whom it owes money, to try to come
to an agreement (i.e., workout) regarding on how the business can pay back or settle
outstanding debt. During these negotiations, the business discusses the reasons for the
failure and tries to convince the creditors that working out an agreement would benefit all
parties because creditors would receive more money through a workout than if the busi-
Moratorium: An authorized period to ness was forced to go into bankruptcy. A workout usually involves “an extension of time
delay the payment of a debt obligation. (a moratorium), a pro rata settlement (composition), or a combination of the two.”228 The
objective of a workout is similar to a formal reorganization bankruptcy proceeding in that
Composition: A settlement reached be-
the company is attempting to resolve its obligations to creditors and continue in business;
tween a debtor and a creditor prior to
bankruptcy. The settlement discharges however, it is generally much faster, less expensive, and more flexible than bankruptcy.
the debt owed to the creditor for an
amount less than the original amount Bankruptcy
owed. If a business fails to reach an agreement with its creditors to restructure obligations in
order to achieve more manageable payment terms, it may have to file for bankruptcy re-
lief. The principal purpose of the United States Bankruptcy Code (the “Code”) is to grant a
“fresh start” to the “honest but unfortunate debtor.”229 In this context, a fresh start signifies
“a new opportunity in life and a clear field for future effort, unhampered by the pressure
and discouragement of preexisting debt.”230
Discharge: A court action that releases The discharge of debts in bankruptcy is a “permanent order prohibiting the creditors of
a debtor from liability for certain types the debtor from taking any form of collection action” against the discharged debts.231 It is
of debts.
important to note that not all debts are discharged in a bankruptcy proceeding; but rather
each form of bankruptcy (discussed in detail below) identifies the various categories of
debts that are granted a discharge.
The Code is a series of Federal statutes codified under Title 11 of the United States
Code and is the “uniform federal law that governs all bankruptcy cases.”232 Within Title 11,
several subsections define the different types of bankruptcy proceedings (e.g., Chapter 7,
Chapter 9, Chapter 11, Chapter 12, etc.) available to individuals, businesses, and other
entities.
What Happens in Bankruptcy

Two common forms of bankruptcy available to businesses are liquidation and reorganization.
Liquidation
Chapter 7 of the Code relates to liquidation in bankruptcy, which is the most common
form of bankruptcy filed by businesses in the United States.233 According to a press
release from the U.S. Courts, Chapter 7 – Liquidation “is used only when the corporation
sees no hope of being able to operate successfully or to obtain the necessary creditor
agreement.”234
The process of liquidation refers to the sale of a company’s assets for the satisfac-
tion of creditors and the subsequent dissolution of the business. Under Chapter 7, a
bankruptcy trustee gathers and sells a bankrupt company’s nonexempt assets and uses
the proceeds of such assets to pay creditors in accordance with the priority of creditors Trustee: A person who holds property
established by the Code. See the “Hierarchy of Claims, by Priority” discussion later in this on behalf of a beneficiary.
section for information on priority payments.

Nonexempt Assets: Property that
belongs to a debtor which can be
Reorganization liquidated to satisfy creditor claims.
Reorganization in bankruptcy falls under Chapter 11 of the Code and is the second-most Examples include motor vehicles, real
common form of bankruptcy filed by businesses in the United States.235 Chapter 11 busi- estate, factories, etc.
ness reorganization “can be used as the means of working out an arrangement with credi-
tors where the debtor is allowed to continue in business …[or] can be used for a complete
reorganization of the corporation.”236
Under Chapter 11, the company files a “plan of reorganization,” which is prepared in
cooperation with its creditors, and details the necessary steps the company must take in
order to emerge from bankruptcy as a viable entity. The plan of reorganization may call
for any number of actions the business and its advisors deem necessary for a successful
reorganization of the business, including, for example, the sale of non-essential business
units to third parties or the reworking of labor contracts.237 The “plan of reorganization”
must be reasonable in its attempt to restructure the business because it must obtain Creditors’ Committee: A group
approval from the creditors’ committee and the bankruptcy court. Since the plan of representing several entities that
have claims against a business in a
reorganization generally includes concessions from all interested parties, showing favor
bankruptcy proceeding.
to any particular group of creditors will likely cause the plan to be rejected by competing
creditors whose interests are impacted more severely by the bankruptcy. Further, as it
ordinarily occurs, if a creditor or class of creditors rejects a plan of reorganization, then
the bankruptcy court may confirm or approve the plan over such objection — but only
upon a demonstration that the creditor or creditor class would have fared no better had
the bankruptcy been processed under Chapter 7 – Liquidation.
Prepackaged Reorganization
A prepackaged bankruptcy is similar to a workout and refers to a proceeding in which
the business filing for protection has met with its creditors to negotiate their expected re-
coveries prior to the actual filing of a petition under the Code. The goal of a prepackaged
bankruptcy is to shorten the bankruptcy process to save fees a company would typically
pay to bankruptcy advisors. A prepackaged bankruptcy also minimizes the amount of time
spent in bankruptcy restructuring a business and, consequently, can return an operating
entity to its core business and generating revenue much sooner than if it had participated
in a standard reorganization.
FIGURE 2.13
BANKRUPTCY DECISION FLOW

Section 363 Sale
CAN THE BUSINESS It may become apparent that a company cannot reorganize and maintain its current owner-
MEET ITS OBLIGATIONS
ship structure and therefore must pursue a sale of most, if not all, of its assets under
TO CREDITORS?
Section 363 of the Code. In this scenario, the company does not emerge from bankruptcy
YES NO
but, instead, comes under new ownership — as in the cases of the Chrysler and GM
bankruptcies.
Continue Attempt Workout
Operations with Creditors Regardless of the nature of the reorganization, many companies face the same deci-
sions in the process leading up to declaring bankruptcy. These decisions are described in
Settlement Figure 2.13.
Reached?
YES Who Is Involved in Bankruptcy?

NO
Creditors
File for
Bankruptcy When a business enters into a bankruptcy proceeding, a variety of individuals or organiza-
tions may have claims — employees may be owed wages, banks may be owed loans,
Can Debts Be
Restructured? and other financial institutions may have unfulfilled contracts with the business. These
individuals or companies are all referred to as creditors because the business owes
YES NO
them something. At the point of bankruptcy, the likelihood of any of these creditors being
repaid depends on whether the company has enough assets to repay its debts. The Code
Chapter 11 Chapter 7
Reorganization Liquidation provides for circumstances in which a business does not have enough assets to satisfy all
of its debts by establishing a hierarchy of priority among creditors.
Plan of
Reorganization In some cases, the creditors and the business may have already negotiated terms
Approved?
Sell Assets for the
of repayment and developed a restructuring or liquidation plan in advance of filing. Such
NO Satisfaction of
Creditors
arrangements can improve the speed and efficiency of a restructuring or even liquidation.
YES However, this is often not the case and, as experienced by Chrysler, certain creditors may
New Company Dissolve
Emerges Company
take issue with the plan and try to block or stall the bankruptcy plan until they are satisfied
or until their objections have been overruled by the court.
Claimants to the assets of a company are categorized as either secured creditors or
unsecured creditors. A secured creditor must present proof of its claim to the bankruptcy
Secured Creditor: A creditor that holds
court for the claim to be honored. Secured claims are then paid directly from forfeiture of
a special assurance of debt payment,
through holding collateral or possess- the company’s collateral or proceeds from the sale of its collateral. If the collateral is insuf-
ing a lien on the same. ficient to pay the claim in full, the balance becomes an unsecured claim and enters into the
queue of other unsecured creditors. As the name implies, unsecured creditors do not have
Collateral: Tangible assets pledged
any tangible assets pledged against the debts owed to them by the business.
against debts owed.
TABLE 2.30
PRIORITIES, PER THE U.S. BANKRUPTCY CODE

Priority Claim
First Allowed unsecured claims:
• Domestic support obligations (debts to spouse or children for court-ordered support)
• Administrative expenses of the bankruptcy (lawyers, trustees, etc.)
• “Gap” claims (unsecured, post-petition claims in an involuntary bankruptcy case arising
after initiation of case but before appointment of trustee, relating to ordinary business or
finances)
• Wages, commissions (claims of employees/independent salespersons up to $10,000
per claim)
• Employee benefit plans (contributions of up to $10,000 per employee)
• Specific claims of farmers and fishermen against bankrupt storage or processing facilities
• “Layaway” claims (individuals did not receive the goods/services for which they made
deposits)
• Government taxes (recent income, sales, employment, or gross receipts taxes)
• Regulatory obligations (to FDIC or equivalent to maintain capital of insured depository
institution)
• Vehicle-related personal injury or death (if debtor used vehicle/vessel under the influence
of drugs/alcohol)
Second Other claims, filed on time, that do not fall into “First,” “Third,” or “Fourth” category below
Third Allowed unsecured tardy or late claims
Allowed secured or unsecured claims for any fines, penalties, damages from before the
Fourth
bankruptcy which are not compensation for actual pecuniary loss suffered by the claimant
Fifth Interest accrued, at legal rate, from the date of the filing to payment of allowed claims
Sixth To the debtor
Source: Mini Code Special Redlined Edition, United States Bankruptcy Code, 2006 Edition, Texas: AWHFY, L.P., 2005.
Hierarchy of Claims, by Priority

The term “priority” refers to the order in which unsecured claims in a bankruptcy case are
paid from the money available in the bankruptcy estate. Claims in the higher priority are
paid in full before claims in a lower priority receive anything. Once a company pays all of
its debts, any remaining assets are returned to its shareholders.
Section 726 of the Code lists six classes of unsecured creditors in a bankruptcy, in
order of priority.238 Table 2.30 provides a summary outline of those classes. Note the first
grouping of claims is defined by Section 507 of the Code and is further broken down into
a sub-hierarchy.
Trustee
The role of the trustee varies greatly, based on the chapter under which a company files. A
Chapter 7 trustee is broadly responsible for managing the financial aspects of a bankrupt
business undergoing liquidation. The trustee can be an individual or a team of professionals
who, among other things:
• account for property received
• investigate the financial affairs of the debtor
• review proofs of claim

• oppose the debtor’s discharge, if appropriate
• furnish information to interested parties
• report on the administration of the case
The trustee is paid out of the proceeds of the liquidation and is second in order among
the first class of unsecured creditors.
A Chapter 11 trustee serves more in an administrative capacity, focusing more directly
on the reporting requirements associated with the bankruptcy case and fee applications
for compensation that are submitted by professionals and advisors rendering bankruptcy-
related services to the company. The trustee receives a quarterly fee from the business as
compensation.
Bankruptcy Court
Bankruptcies, both personal and corporate, are administered by U.S. Federal courts; bank-
ruptcy cases cannot be filed in state court. The Federal court system is composed of 94
districts, all of which handle bankruptcy matters, and substantially all of which have a court
specifically designated for bankruptcy.239
Example of Chapter 11 Bankruptcy Process

This section provides a simplified step-by-step example of a Chapter 11 bankruptcy pro-
cess for a hypothetical business, “Sample Company,” walking through the key steps from
the initial realization that it cannot repay its creditors to the new company emerging from
the process. A bankruptcy process can be lengthy, especially if the negotiation with credi-
tors is difficult — all it takes is one creditor to delay the approval of a restructuring plan (or
a pre-bankruptcy restructuring agreement). The process detailed below and illustrated in
Figure 2.14 for Sample Company is a simplified version, focused on the key steps of the
process.
A. Sample Company is operating in a difficult market environment. Its revenues have
shrunk, but its obligations have not. It discovers that it no longer can afford to pay its
debts to its creditors without cutting back on its variable costs. It cancels all non-
essential purchases, suspends dividend payments to its shareholders, but still this
does not generate enough cash to pay its obligations. Sample Company begins to
lay off employees to shrink its payroll and closes unprofitable plants to cut operating
costs, but still cannot bring its expenditures in line with its new, lower revenues.
FIGURE 2.14
BANKRUPTCY PROCESS
A B C D E F G H I J K
A: Unable to pay creditors
B: Attempts to negotiate out-of-court settlement
C: Company declares Chapter 11, receives “Automatic Stay”
D: Creditors’ Committee forms, Trustee reviews creditors’ claims
E: Company develops restructuring plan
F: Court reviews, approves restructuring plan
G: Company seeks, obtains “DIP” financing
H: Company executes restructuring plan
I: Company seeks, obtains exit financing
J: Court approves exit from bankruptcy
K: “New” company emerges from bankruptcy
B. Sample Company owes a lot of money; it is saddled with expensive debts to creditors
incurred when it borrowed heavily to grow a few years earlier. These creditors range
from banks that provided loans, to bondholders whose bonds were issued at high rates
because the company’s debt was not highly rated, to obligations for employees’ benefit
plans (such as pensions). Seeing that it cannot continue to meet all these obligations,
Sample Company seeks to renegotiate some or all of its debts to a more manageable
level.
C. Some of Sample Company’s creditors agree to reduce the debt that they are owed,
thinking that a voluntary restructuring is preferable to a court-administrated bankruptcy
or liquidation where it is uncertain what they would receive for their claims. However,
certain creditors are uncompromising, thinking that the company’s offers understate
what they think the company can actually afford to repay them. They refuse the offer of
a voluntary restructuring, which forces Sample Company to file a petition for Chapter
11 bankruptcy with the U.S. court in its district. With its filing, Sample Company
receives an “Automatic Stay” meaning that creditors are temporarily prohibited from
enforcing their claims outside of the bankruptcy forum.
D. With the filing of the bankruptcy petition, Sample Company becomes what is known as
Debtor in Possession (“DIP”): A com- the debtor in possession (“DIP”). DIPs retain possession of the operations and assets
pany which is operating under Chapter
of the business until otherwise ordered by the court (which could be the case if the
11 bankruptcy protection, which still
technically owns its assets but is court ultimately decides Chapter 7 – Liquidation is the best option and appoints a
operating them to maximize the benefit trustee to manage the company through that process). Sample Company also provides
to its creditors. to the court a range of documents certifying its assets and liabilities, income and ex-
penditures, contracts and unexpired leases, and a statement certifying its financial af-
fairs. Meanwhile, the U.S. Trustee, appointed by the court to monitor Sample Company
during its bankruptcy, works with creditors to assemble a Creditors’ Committee. The
Creditors’ Committee hires an attorney to advocate for the creditors’ claims with the
court. Any creditors whose claims are not listed on the schedules provided to the court
by Sample Company must provide a proof of claim to be included in the case.
E. As DIP, Sample Company assumes all of the fiduciary responsibilities of a trustee,
aside from the investigative role, and uses this authority to hire a team of lawyers,
accountants, consultants, appraisers, and auctioneers — whose compensation
represents unsecured claims with priority over all other unsecured claims except
“super-priorities” — to help it throughout the restructuring process. Sample Company
works with this team to develop a restructuring plan that both shrinks the company and
its debts. Ideally, Sample Company will emerge as a leaner, profitable company with
more manageable debts. The plan that Sample Company develops includes closing
down additional unprofitable plants, selling certain business lines, and converting some
of its debt holders into equity holders by exchanging their bonds or loans for shares
of stock, making them partial owners in the new company. In addition to selling just
portions of a business, a company’s restructuring plan can include an arrangement
whereby the entire business is sold to another company (a Section 363 sale). An
example of a Section 363 sale can be found in the recent restructuring of Chrysler,
where the operating business was sold to a new group of owners.
F. Once Sample Company has developed its restructuring plan, it must seek the consent
of its creditors to approve the plan. In order to receive that consent, Sample Company
files a disclosure providing creditors with information about its plan and Sample
Company’s affairs so that they can make an informed decision about the proposed
plan. The court then holds a hearing. In Sample Company’s case, the creditors approve
its plan, which is confirmed in a court hearing as being feasible, in good faith, and com-
pliant with the Code, allowing it to begin implementation of the restructuring process.
Additionally, the confirmation of the plan effectively discharges Sample Company from
its dischargeable pre-filing debts (i.e., debts not part of the bankruptcy claims), and
replaces them with the agreed-upon obligations contained in the plan.240
G. Since Sample Company has taken on additional expenses such as lawyers and
consultants, its plan provides for operating capital to help it complete the restructuring
process. It obtains this financing, called “DIP financing,” from a bank which receives DIP Financing: A credit line used
court-appointed “super-priority” in claims — placing it above all other unsecured credi- during Chapter 11 proceedings to
tors in the priority list. maintain the value of a company’s
asset base.
H. After the confirmation of the restructuring plan, Sample Company operates as a func-
tioning company; it is now obligated to begin making any payments it promised in the
plan, and is bound by all commitments contained in the provisions of the plan (which
supersede its pre-bankruptcy contracts). Sample Company’s restructuring process is
relatively straightforward, and it achieves the key objectives rapidly. It sells several non-
core units, and converts the debt to its bondholders to an equity stake as determined
in the plan. Further, it converts some of the unpaid obligations to employees’ benefit
plans into equity stakes. Throughout this process Sample Company reports regularly
to the court and the Creditors’ Committee on the progress made since confirmation of
the plan.
I. As Sample Company nears the completion of its restructuring and recapitalization
process, it seeks exit financing — actually a key component of its restructuring plan. It
negotiates an exit financing facility from a major lender, which it uses to pay off certain
creditors’ claims and to fund its ongoing operations after bankruptcy. This exit financ-
ing will enable the new company to emerge from bankruptcy in a strong, competitive
state.
J. Once Sample Company completes its restructuring plan, it returns to court and applies
for a “final decree” which certifies consummation of the plan. This enables the newly
restructured, recapitalized Sample Company to emerge from bankruptcy.
K. The “new” Sample Company begins operating, and uses its new financial health to
operate more competitively in its market.
Chrysler
Chrysler filed for Chapter 11 bankruptcy on April 30, 2009, and the transaction
in which substantially all of its assets were sold to the newly formed entity (“New
New Chrysler: The entity that pur- Chrysler”) closed on June 10, 2009. Chrysler has received $16.7 billion in com-
chased substantially all of Chrysler’s mitments from Treasury through AIFP, ASSP, and AWCP, $10.4 billion of which
assets during bankruptcy.
was provided through DIP or working capital funding after Chrysler’s bankruptcy
filing.241 Figure 2.15 shows a timeline of Treasury’s investments in Chrysler as well
as important milestones regarding Chrysler’s bankruptcy.
FIGURE 2.15
CHRYSLER TIMELINE
JANUARY 2009 FEBRUARY 2009 MARCH 2009 APRIL 2009 MAY 2009 JUNE 2009
JANUARY 2 FEBRUARY 17 MARCH 30 APRIL 9 MAY 1 JUNE 10

Treasury commits to Chrysler submits Obama Administration Treasury commits Treasury provides Substantially all of
invest $4 billion in restructuring lays out framework for to invest $1.5 Chrysler with a Chrysler’s assets are
Chrysler. plan to Obama Chrysler to work with billion in an SPV $3 billion sold to New Chrysler
Administration. Fiat to achieve viability. for the Auto DIP loan. pursuant to Section
Supplier Support 363 of the
Program.a MAY 20 Bankruptcy Code and
Treasury amends Treasury commits to
APRIL 29 initial DIP fund an additional
Treasury amends initial investment in $6.6 billion.
investment in Chrysler Chrysler by
by committing an investing an
additional $500 million.b additional
$757 million.c
APRIL 29
Treasury invests $280
million in an SPV for the
Auto Warranty
Commitment Program.
APRIL 30
Chrysler files for
bankruptcy under Section
363 of the Bankruptcy
Code.
Notes:
a
Commitment was decreased to $1 billion on 7/8/2009.
b
This $500 million commitment was never funded.
c
$1.9 billion of the total $3.8 billion DIP financing was never funded.
Sources: Treasury, Transactions Report, 7/2/2009; Treasury, “Obama Administration Auto Restructuring Initiative: Chrysler-Fiat Alliance,” 4/30/2009,
www.financialstability.gov, accessed 6/9/2009; Treasury, “Obama Administration New Path to Viability for GM & Chrysler,” 3/30/2009,
www.financialstability.gov, accessed 6/9/2009; Treasury, responses to SIGTARP drafts, 7/9/2009 and 7/13/2009.
Chrysler-Fiat Alliance
Pro Forma: In finance, refers to the
On March 30, 2009, the President’s Auto Task Force determined that Chrysler’s
presentation of hypothetical financial
restructuring plan was not likely to lead to viability on a stand-alone basis as it was information assuming that certain
structured at the time. The Government stated that Chrysler could only achieve assumptions will happen. For example,
viability by forming a partnership with Fiat.242 On April 30, 2009, Chrysler filed Table 2.31 sets forth the ownership
for bankruptcy under Chapter 11 of the United States Bankruptcy Code. As noted interests in New Chrysler based on the
above, New Chrysler emerged from bankruptcy on June 10, 2009, with a new assumption that Fiat will meet its per-
ownership structure including Fiat. See Table 2.31 for a list of the actions taken by formance goals and obtain an addition-
each stakeholder and their respective equity stakes in New Chrysler.243 al 15% of equity from the other equity
holders. If the new equity stakes were
not reported pro forma, the equity
interest of the other equity participants
would be higher to account for Fiat’s
additional 15%.
TABLE 2.31
CHRYSLER-FIAT ALLIANCE STAKEHOLDERS ACTIONS AND EQUITY STAKE

Stakeholders Action Equity Stakes with New Chrysler-Fiat Alliancea
• 20% equity in New Chrysler
• Contribute billions of dollars in technology and intellectual property
Fiat • 15% additional equity based on performance metricsb
• Offer access to global distribution network
• Selection of three directors
Secured Lenders • Exchange $6.9 billion secured claim • Receive $2 billion cash
• 55% equity in New Chrysler, pro forma for Fiat
UAW (VEBA) • Make concessions on wages, benefits, and retiree health care additional equity
• Selection of one director
• Waive repayment of $1.9 billion DIP financing provided during bankruptcyc
United States • Provide $4.7 billion in working capitald • 8% equity in New Chrysler, pro forma
Treasury • Waive $3.5 billion of the $4 billion pre-bankruptcy loan, with the • Selection of four directors
remaining $500 million carried over to the new financinge
Canadian • 2% equity in New Chrysler, pro forma
• Lend money alongside the U.S. Treasury based on a 3:1 formula
Government • Selection of one director
• Waive its share of Chrysler’s $2 billion second-lien debt
Daimler • Waive 19% equity in Chrysler’s parent • None
• Pay $600 million to Chrysler’s Pension Plan to settle PBGC obligation
• Waive its share of Chrysler’s $2 billion second-lien debt
• Forfeit its entire equity stake in Chrysler
Cerberus • Transfer ownership of old Chrysler headquarters building to the New • None
Chrysler-Fiat alliance
• Contribute to a claim against Daimler to help settle with PBGC
PBGC • Settle claim with Daimler • None

a
The listed ownership percentages are based on the assumption that Fiat will achieve all three performance metrics.
b
Fiat can earn this 15% equity by achieving certain performance metrics. It would receive 5% for meeting each of three performance goals: produce a vehicle at a Chrysler factory in the United States that
performs at 40 mpg or better; provide Chrysler with a distribution network in numerous foreign jurisdictions; manufacture state-of-the-art, next generation engines at a U.S. Chrysler facility.
c
$3.8 billion DIP financing was originally committed but $1.9 billion of that commitment was never funded.
d
A total of $6.6 billion is committed; $2 billion is used to pay senior secured lenders.
e
$4.5 billion was originally committed, but $500 million of that commitment was never funded.
Sources: Treasury, “Obama Administration Auto Restructuring Initiative: Chrysler-Fiat Alliance,” 4/30/2009, www.financialstability.gov/docs/AIFP/Chrysler-restructuring-factsheet_043009.pdf, accessed
6/9/2009; Treasury, responses to SIGTARP draft reports, 7/9/2009 and 7/13/2009.
TARP Support for Chrysler

As shown in Table 2.26, Treasury is using a number of different TARP investment
vehicles to support Chrysler. Treasury has stated that its intention is to maximize
taxpayer return, while at the same time maximizing the likelihood of the New
Chrysler succeeding.244 Prior to Chrysler’s bankruptcy, Treasury increased its initial
$4.5 billion loan by $280.1 million, which was set aside for the Auto Warranty
Commitment Program (“AWCP”) and which will be returned to Treasury. While
Chrysler was in bankruptcy, Treasury committed to provide a loan of $3.8 billion
in DIP financing. On June 10, 2009, Treasury committed $6.6 billion in new debt
obligations. Treasury does not expect to receive repayment for its DIP investments
but expects repayment of $6.6 billion in loans and has received an 8% pro forma
equity share in New Chrysler.245 Treasury will also select four of the initial inde-
pendent directors, but has claimed that it will play no other role in management
or governance of the company.246 Treasury anticipates having quarterly meetings
with Chrysler leadership that focus solely on financial reporting and key operating
metrics.
Financing
Chrysler entered into an agreement with GMAC, pursuant to which GMAC agreed
to provide certain dealer and retail financing. GMAC will have financing agree-
ments with both Chrysler and GM post-bankruptcy. Treasury has provided GMAC
with additional capital to support its anticipated growth in Chrysler dealer and
retail loans.247
FIGURE 2.16
TABLE 2.32 GM TIMELINE

IMPACT OF THE CHRYSLER-FIAT ALLIANCE ON STAKEHOLDERS
Stakeholders Impact DECEMBER 2008 FEBRUARY 2009
• Chrysler’s insurers will continue to pay workers compensation
claims.
Employees
• Pension plan and VEBA funding will be transferred to the pur-
chaser. DECEMBER 29 FEBRUARY 17
Treasury GM submits
• Chrysler will continue to pay suppliers. commits to loan restructuring
Suppliers
• Auto Supplier Support Program will continue to operate. GM $884 billion. plan to Obama
• Chrysler will continue to honor customer warranties. Administration.
• Chrysler will continue to honor dealer incentives for those
Dealers DECEMBER 31
dealers that will remain operational. Treasury invests
• Chrysler has identified certain dealers to terminate. $13.4 billion in GM.
• Modified labor agreement between UAW and Chrysler will be
UAW Note:
operative. a
Commitment was decreased to $2.5 billion on 7/8/2009.
Creditors • Majority of senior secured lenders support the transactions.
Sources: Treasury, Transactions Report, 7/2/2009; Treasury,
“Obama Administration Auto Restructuring Initiative: General
Source: Treasury, “Obama Administration Auto Restructuring Initiative: Chrysler-Fiat Alliance,” 4/30/2009, www.
financialstability.gov/docs/AIFP/Chrysler-restructuring-factsheet_043009.pdf, accessed 6/9/2009.
Motors Restructuring,” 6/1/2009, www.financialstability.gov,
accessed 6/9/2009; Treasury, “Obama Administration New
Path to Viability for GM & Chrysler,” 3/30/2009,
www.financialstability.gov, accessed 6/9/2009; Treasury,
responses to SIGTARP draft, 7/9/2009 and 7/13/2009.
Execution of the Chrysler-Fiat Alliance

Chrysler entered bankruptcy on April 30, 2009, and substantially all of its assets
were sold to New Chrysler on June 10, 2009, with a new alliance with Fiat.248 The New GM: The entity that purchased
impact of the alliance on the specific stakeholders is listed in Table 2.32. substantially all of GM’s assets during
bankruptcy.
General Motors
General Motors (“GM”) filed for Chapter 11 bankruptcy on June 1, 2009, and the
transaction in which substantially all of its assets were sold to the newly formed
entity (“New GM”) closed on July 10, 2009. Treasury has committed $53.4 billion
to GM, of which $30.1 billion is DIP financing.249 Figure 2.16 shows a timeline
of Treasury’s investments in GM as well as important milestones regarding GM’s
bankruptcy.
Restructured General Motors

In accordance with the March 31, 2009, deadline, the Obama Administration
determined that GM’s restructuring plan was not likely to lead to viability on a
stand-alone basis. The Government laid out the framework for GM to achieve vi-
ability through a substantially more aggressive restructuring plan.250 On June 1, 2009,
GM filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code.
Under its reorganization plan, New GM will purchase from GM the assets needed
to implement the plan for viability. In exchange for this purchase, Treasury will
waive the majority of its loans to GM and obtain a controlling equity stake in the
new company. See Table 2.33 for a list of the actions taken by each stakeholder and
their respective role with New GM.251
MARCH 2009 APRIL 2009 MAY 2009 JUNE 2009 JULY 2009
MARCH 30 APRIL 9 MAY 20 JUNE 3 JULY 10

Obama Administration Treasury Treasury amends Treasury commits to a Substantially all of
lays out framework for commits to invest earlier investment in $30.1 billion DIP loan. GM’s assets are sold
GM to restructure and $3.5 billion in an GM by investing an to New GM pursuant
achieve viability. SPV for the Auto additional $4 billion. to Section 363 of
Supplier Support the Bankruptcy
Program.a MAY 27 JUNE 1 Code.
Treasury places $361 GM files for bankruptcy
million in an SPV for under Section 363 of the
APRIL 22 the Auto Warranty Bankruptcy Code.
Treasury amends Commitment Program.
earlier investment in
GM by investing an MAY 29
additional $2 billion. Treasury exchanges its
$884 million loan to GM
for a portion of GM’s
equity interest in GMAC.
TARP Support for GM

As shown in Table 2.26, Treasury has made a number of investments in GM. In
December 2008, Treasury made two initial investments in GM: one that provided
$884 million and one that committed to provide GM an additional $13.4 billion in
financing. Treasury made three amendments to the $13.4 billion loan bringing the
total of that loan, as of May 27, 2009, to $19.8 billion, which includes $361 mil-
lion used to capitalize an SPV for the Auto Warranty Commitment Program.252
On May 29, 2009, Treasury exchanged its $884 million loan in GM for a por-
tion of GM’s common equity in GMAC. This transaction raised Treasury’s owner-
ship of GMAC’s common equity to 35.4%.253
GM filed for bankruptcy on June 1, 2009. On June 3, 2009, Treasury commit-
ted to loan GM $30.1 billion, under the terms of the DIP financing agreement.254
According to Treasury, the Government is taking steps to limit its involvement
in the day-to-day management of GM. The Obama Administration has published
four core principles to guide the Government’s management of ownership interests
TABLE 2.33
NEW GM STAKEHOLDERS ACTIONS AND ROLES

Stakeholders Restructuring Actions Role with New GM
• 17.5% equity share of New GM
• Make concessions on
• Warrants to purchase an additional 2.5%
UAW (VEBA) compensation and retiree
share of New GM
health care
• Select one initial director
• 10% equity share of New GM
• Give up $27.1 billion of
Bondholders • Warrants to purchase an additional 15%
unsecured debt
share of New GM
GM Pension Plans • None • Transferred to New GM
• Provide $30.1 billion in DIP
• $7.1 billion in debt assumed by New GM
financing to support GM
United States • $2.1 billion of preferred stock in New GM
through bankruptcy
Treasury • 61% equity share of New GM
• Contribute the $19.4 billion
• Select 10 initial directors
pre-bankruptcy loan
• $1.7 billion in debt and preferred stock in
Governments of
New GM
Canada and • Lend $9.5 billion
• 12% equity share of the New GM
Ontario
• Select one initial director
Notes: Numbers affected by rounding. Treasury did not publish pro forma data on equity ownership.
Sources: Treasury, “Obama Administration Auto Restructuring Initiative: General Motors Restructuring,” 6/1/2009, www.financialstabil-
ity.gov/latest/05312009_gm-factsheet.html, accessed 6/10/2009; Treasury, responses to SIGTARP draft reports, 7/9/2009 and
7/13/2009.
in private firms such as GM. According to Treasury, the Government will attempt
to do the following:255
• seek to dispose of its ownership interest as soon as practicable

• reserve the right to set upfront conditions to protect taxpayers, promote finan-
cial stability, and encourage growth
• protect the taxpayers’ investment by managing its ownership stake in a hands-
off, commercial manner
• vote on core governance issues, including the selection of a company’s board of
directors and major corporate events or transactions
OFS has not publicly released the details of its exit strategy for GM.
Execution of the GM Restructuring

GM entered bankruptcy on June 1, 2009. The impact of the restructuring on the
specific stakeholders is described in Table 2.34.
TABLE 2.34
EXECUTION IMPACT OF THE GENERAL MOTORS RESTRUCTURING ON

STAKEHOLDERS
Stakeholders Impact
Employees • Pension Plan and VEBA funding will be transferred to New GM
• GM will continue to pay suppliers
Suppliers
• Auto Supplier Support Program will continue to operate
• GM will continue to honor customer warranties
• GM will attempt to honor dealer incentives for those dealers that will
Dealers
remain operational
• GM will identify certain dealers to terminate
UAW • Modified labor agreement between UAW and GM will be operative
Source: Treasury, “Obama Administration Auto Restructuring Initiative: General Motors Restructuring,” 6/1/2009, www.financialstability.
gov/latest/05312009_gm-factsheet.html, accessed 6/10/2009.
GMAC
The majority of automobile purchases in the United States are financed, including
an estimated 80% – 90% of consumer purchases and substantially all dealer inven-
tory purchases.256 In fall 2008, credit began to tighten and it became increasingly
difficult for both dealers and customers to obtain credit for automobile purchases.
It has been estimated that 2 million to 2.5 million vehicle sales were lost because
either dealers or customers could not obtain credit.257 Treasury has stated that it
believes its investment in GMAC will help provide a reliable source of financing
to both auto dealers and customers seeking to buy cars, and that a recapitalized
GMAC will offer strong credit opportunities, help stabilize the auto financing mar-
ket, and contribute to the overall economic recovery.258 Under AIFP, Treasury has
invested $13.4 billion in GMAC.259
GMAC has entered a master financing agreement with Chrysler to provide
certain dealer and retail financing.260
Status of Funding
On December 29, 2008, Treasury invested $5 billion in GMAC. At the time of this
investment, GMAC reorganized into a bank holding company and thus became
eligible to receive TARP funds and participate in other Government support
programs.261 On May 21, 2009, Treasury purchased an additional $7.5 billion of
mandatorily convertible preferred equity in GMAC.262 Of this $7.5 billion invest-
ment, $4 billion will support GMAC’s anticipated growth in Chrysler dealer and
retail loans.263 The additional $3.5 billion will help GMAC address its capital needs
as identified through the SCAP stress test completed with the Federal Reserve.264
At the time of the initial Treasury investment, the Federal Reserve required
GMAC to raise $2 billion of new equity. GMAC raised $1.1 billion through private
investments, and Treasury loaned GM the remaining $884 million to purchase
GMAC equity.265 On May 29, 2009, Treasury exchanged this $884 million loan to
GM for a portion of GM’s common equity interests in GMAC. As a result of that
exchange, Treasury now holds 35.4% of GMAC’s common shares.266 Treasury’s
mandatorily convertible preferred shares may be converted to common shares at
GMAC’s option with the approval of the Federal Reserve, though any conversion by
GMAC must not result in Treasury owning in excess of 49% of GMAC’s common
shares except under the following circumstances:267
• with the prior written consent of Treasury

• pursuant to GMAC’s capital plan, as agreed upon by the Federal Reserve
• pursuant to an order of the Federal Reserve compelling such a conversion
Supervisory Capital Assessment Program (“SCAP”) For more information on the

As detailed in the “Capital Assessment Program” discussion earlier in this section, Supervisory Capital Assessment
U.S. bank supervisors recently created SCAP to determine if BHCs have a suf- Program, see “Financial Institution
ficient capital buffer to operate in worse-than-expected future economic condi- Support Programs” earlier in this
tions.268 As a result of the stress test, GMAC is required to raise a SCAP buffer of section.
$11.5 billion. As noted previously, $3.5 billion of Treasury’s recent investment will
be applied to meet this capital shortfall.269
Chrysler Financial
In January 2009, Treasury loaned $1.5 billion to a bankruptcy-remote SPV to sup-
port Chrysler Financial retail loan originations. Treasury’s loan forms the senior
portion of the capital structure of the SPV, with Chrysler Financial providing the
junior capital. Treasury’s loan is collateralized by retail auto loans with stronger
credit characteristics (higher credit scores, lower loan-to-value, shorter maturity)
than Chrysler Financial’s broader retail loan portfolio.270
Chrysler Financial has essentially ceased ordinary operations and is winding
down its business.271 Due to the nature of the collateral, Treasury expects to recover
fully the $1.5 billion loan to Chrysler Financial.
HOMEOWNER SUPPORT PROGRAMS

Making Home Affordable Program
The Making Home Affordable (“MHA”) program was introduced by the
Administration on February 18, 2009, and was intended to assist homeowners who
Servicer: Administrative party that col- are facing foreclosure or struggling to make their monthly mortgage payments.
lects payments and generates reports Two weeks later, on March 4, 2009, Treasury released detailed program guidelines,
regarding mortgage payments. which allowed mortgage servicers to begin to refinance and issue modifications.272
MHA comprises three major initiatives: a loan modification program, a loan refi-
Private-Label Mortgages: Loans that nancing program, and additional support to lower mortgage interest rates. Only the
are not owned or guaranteed by Fannie loan modification program, known as the Home Affordable Modification Program
Mae, Freddie Mac, or another Federal
(“HAMP”) currently involves TARP funds.273
agency.
According to Treasury, HAMP is a $75 billion program that will lower monthly
mortgage payments for homeowners facing foreclosure by providing loan modifica-
Government-Sponsored Enterprises
tions and incentive payments for the loan servicers, loan holders, and homeowners.
(“GSEs”): Private corporations created
by the Government to reduce borrow- Under HAMP, $50 billion from TARP will be used to modify private-label mortgag-
ing costs. They are chartered by the es. An additional $25 billion, funded under the Housing and Economic Recovery
U.S. Government but are not consid- Act of 2008 (“HERA”), will be used to modify mortgages that are owned or guar-
ered to be direct obligations. anteed before January 1, 2009, by Government-sponsored enterprises (“GSEs”),
particularly Fannie Mae and Freddie Mac.274
HAMP has several key components:275
For more information regarding HAMP • The lender will reduce monthly payments so that the borrower’s monthly mort-
eligibility, modifications, and incen- gage is no greater than 38% of the borrower’s monthly income.
tive payments, see SIGTARP’s April • Treasury and the lender will split the cost of reducing the monthly payments
Quarterly Report, Section 2: “TARP from 38% to 31% of the borrower’s monthly income.
Overview.”
• The borrower will enter a 90-day trial period of reduced payments before enter-
ing program; if successful (i.e., borrower makes payments), the borrower will
maintain new, lower mortgage payments for five years.
• Treasury will make incentive payments to servicers, lenders/investors, and (to
servicers) on behalf of borrowers.
Status of Funds
As of June 30, 2009, Treasury had signed agreements with loan servicers allocating
up to $18 billion under HAMP.276
Countrywide Home Loans Servicing, LLP, will receive up to $5.2 billion —
the largest allocation under the program. The average allocation to each servicer
through HAMP is $781.8 million. These funds can be used to modify both first
and second lien mortgages.277 Table 2.35 provides a detailed list of allocations made
under the HAMP program as of June 30, 2009.
TABLE 2.35
HOME AFFORDABLE MODIFICATION PROGRAM FUNDING

Adjusted
Date of Cap as of
Initial 6/30/2009
Transaction Institution Ultimate Parent Company ($ Millions)
4/13/2009 Select Portfolio Servicing Credit Suisse Group AG $660.59

4/13/2009 CitiMortgage, Inc. Citigroup, Inc. 1,079.42
4/13/2009 Wells Fargo Bank, NA Wells Fargo & Company 2,410.01
4/13/2009 GMAC Mortgage, Inc. GMAC 1,017.65
4/13/2009 Saxon Mortgage Services, Inc. Morgan Stanley 632.04
4/13/2009 Chase Home Finance, LLC JPMorgan Chase & Co. 3,552.0
4/16/2009 Ocwen Financial Corporation, Inc. N/A 553.38
4/17/2009 Bank of America, N.A. Bank of America Corporation 804.44
Countrywide Home Loans
4/17/2009 Servicing, LP Bank of America Corporation 5,182.84
4/20/2009 Home Loan Services, Inc. Bank of America Corporation 447.30
4/20/2009 Wilshire Credit Corporation Bank of America Corporation 453.13
4/24/2009 Green Tree Servicing, LLC N/A 91.01
4/27/2009 Carrington Mortgage Services, LLC N/A 131.02
5/1/2009 Aurora Loan Services, LLC Lehman Brothers Holding, Inc. 459.55
5/28/2009 Nationstar Mortgage LLC N/A 117.14
6/12/2009 Residential Credit Solutions Residential Credit Holdings, LLC 19.40
6/17/2009 CCO Mortgage The Royal Bank of Scotland, PLC 16.52
6/17/2009 RG Mortgage Corporation R&G Financial Corporation 57.00
6/19/2009 First Federal Savings and Loan N/A 0.77
6/19/2009 Wescom Central Credit Union N/A 0.54
Citizens First Wholesale Mortgage
6/26/2009 Company N/A 0.03
6/26/2009 Technology Credit Union N/A 0.07
6/26/2009 National City Bank PNC Financial Services Group, Inc. 294.98
Total $17,980.83
Notes: Numbers may be affected by rounding. Data as of 6/30/2009.
Sources: Treasury, Transactions Report, 7/2/2009; Factiva website, http://fce.factiva.com/pcs/default.aspx, accessed 6/24/2009;
“CMS, Loan Servicing,” https://myloan.carringtonms.com, accessed 6/24/2009; “Nationstar Mortgage, About Us,” https://www.
nationstarmtg.com, accessed 6/24/2009; “RCS, Corporate Information,” https://www.residentialcredit.com, accessed 6/24/2009;
“About CCO Mortgage,” https://www.ccomortgage.com, accessed 6/24/2009; “First Federal, About Us,” http://www.ourfirstfed.com,
accessed 6/24/2009; GMAC Investor FAQ, www.gmacfs.com, accessed 6/24/2009.
Second Lien Program

On April 28, 2009, Treasury released guidelines regarding the Second Lien
Program within HAMP. A significant portion of delinquent borrowers carry both
senior- and second-lien debt and therefore may need assistance with both loans to
remain in their homes. In other cases, homeowners may be able to pay their first
mortgage, but the second mortgage increases the monthly payments to a level that
is no longer affordable. According to Treasury, the Second Lien Program was de-
signed to create substantially affordable mortgage payments for homeowners who
qualify for a first-mortgage modification but still struggle to make their monthly
Second-Lien Debt: Debt that is ranked payments because of a second mortgage. According to Treasury, the Second Lien
lower than senior debt in the event of a
Program could potentially reduce payments for 1 million–1.5 million homeowners,
liquidation or bankruptcy restructuring.
which could account for up to half of all HAMP participants.278
Second-lien debt is subordinate to a senior claim. Both claims use the same
Loan-to-Value (“LTV”) Ratio: In real
asset as collateral. For example, in addition to a mortgage on a home, borrowers
estate lending, the outstanding
principal amount of the loan divided may take out a second mortgage or a home-equity loan to pay for higher education.
by the appraised value of the property Homeowners can use their house as collateral for both loans. The home mortgage
underlying the loan. is considered to be senior to the second loan. In the event of a first-lien foreclosure,
personal bankruptcy, or liquidation, the second-lien investor only gets paid after the
Back-End Debt-to-Income (“DTI”) Ratio: initial mortgage holder has been paid in full.279
Indicates the percentage of an income
that is used to pay debts. Reducing Second Mortgage Payments
To reduce the number of foreclosures initiated by second-lien holders, Treasury
Back-End DTI Ratio = Total Monthly will make an offer to the second mortgage holder that Treasury will share in both
Debt Expense / Gross Monthly Income
the write-down of the mortgage and the refinancing of the loan. Treasury will also
deliver “Pay for Success” incentive payments to servicers, lenders/investors, and
Unpaid Principal Balance (“UPB”):
(to servicers) on behalf of borrowers. Since the bank holding the second mortgage
Amount of a loan that is unpaid. This
does not include additional charges,
may not receive any money if the borrower defaults on the loan, it is incentivized to
such as interest. work with the Government to refinance the second mortgage and recoup at least
part of its investment.280
Lenders may decide that rather than modify a loan, they would like to termi-
For more information regarding Loan- nate the loan in exchange for a one-time payment from the borrower. This is called
to-Value ratios and Debt-to-Income extinguishing a loan. The one-time payment is determined through a set payment
ratios, see SIGTARP’s April Quarterly schedule based on four factors: the loan-to-value (“LTV”) ratio, the back-end debt-
Report, Section 2: “TARP Overview.” to-income (“DTI”) ratio, the unpaid principal balance (“UPB”), and the duration of
the delinquency (the length of time the loan has been overdue).281
Second Lien Guidelines

According to Treasury, prior to the MHA program, mortgage servicers often re-
frained from completing loan modifications due to a lack of common standards. In
addition to the guidelines in the original modification program, on April 28, 2009,
Treasury issued guidelines on second-lien modifications. These guidelines include
the following:282
• The second lien is automatically modified when a first lien is modified.

• The second-lien modification may not delay first-lien modification.
• Borrower, servicer, and lender incentives have been aligned to complete modifi-
cations at an affordable and sustainable level.
• Payments are designed under the principle of “pay for success,” which aligns
incentives to reduce payments in a way that is most cost-effective for taxpayers.
EXECUTIVE COMPENSATION
As discussed in SIGTARP’s previous reports, the executive compensation restric-
tions set forth in EESA have been changed over time by regulations, amendments,
and notices. On February 17, 2009, Section 111 of EESA was amended by Section
7001 of the American Recovery and Reinvestment Act of 2009 (“ARRA”), which
further required that Treasury promulgate regulations to implement ARRA amend-
ments.283 On June 10, 2009, Treasury released its Interim Final Rule on TARP
Standards for Compensation and Corporate Governance (the “Rule”), which imple-
ments EESA as amended by ARRA. The Rule is an “Interim Final Rule” — mean-
ing it took effect upon its publication in the Federal Register on June 15, 2009, but
there is a 60-day public comment period after which it may be changed. The Rule
“implement[s] ARRA provisions, consolidates all of the executive-compensation-
related provisions that are specifically directed at TARP recipients into a single rule
(superseding all prior rules and guidance), and utilizes the discretion granted to the
[Treasury] Secretary under ARRA to adopt additional standards, some of which are
adapted from principles set forth” in guidance previously provided by Treasury in
February 2009.284 Figure 2.17 describes the changes in executive compensation re-
strictions set forth by Congress and included in Treasury regulations over time. For
more information on the guidelines in the figure, see Section 2: “TARP Overview”
in SIGTARP’s April Quarterly Report.
FIGURE 2.17
EXECUTIVE COMPENSATION RESTRICTIONS TIMELINE
OCTOBER 2008 JANUARY 2009 FEBRUARY 2009 JUNE 2009
OCTOBER 3 JANUARY 16 FEBRUARY 4 JUNE 10

EESA NOTICE 2008-PSSFI ADMINISTRATION INTERIM FINAL RULE “TARP
EESA is enacted to include Mandated a more stringent ANNOUNCEMENT ON STANDARDS FOR
executive compensation rule regarding golden EXECUTIVE COMPENSATION COMPENSATION AND
restrictions for any parachutes. New guidance on executive CORPORATE GOVERNANCE”
institution that was to sell compensation separating Implements executive
troubled assets to the companies receiving TARP compensation standards
Government under TARP. funding into two categories: under EESA, as amended by
Exceptional Assistance and ARRA. Consolidates and
OCTOBER 14 Generally Available Programs. supersedes all prior
TREASURY REGULATION executive compensation
31 CFR PART 30 FEBRUARY 17 rules and guidance.
Implemented Section 111 AMERICAN RECOVERY AND
of EESA to institutions REINVESTMENT ACT,
that received financial (“ARRA”) SECTION 7001
assistance from Section 7001 of ARRA is
Treasury. enacted, amending and replacing
Section 111 of EESA.
Sources: EESA, P.L. 110-343, 10/3/2008; Treasury, “Treasury Regulation 31 CFR Part 30,” 10/14/2008; Treasury, “Notice 2008 – PSSFI,” 1/16/2009, www.treas.gov, accessed
1/19/2009; Treasury, “Treasury Announces New Restrictions on Executive Compensation,” 2/4/2009, www.treas.gov, accessed 3/20/2009; ARRA, P.L 111-5, 2/17/2009;
Treasury, “TARP Standards for Compensation and Corporate Governance,” 6/10/2009, www.financialstability.gov, accessed 6/10/2009.
The Rule applies to all TARP recipients, defined in the Rule to include “any
entity that has received or holds a commitment to receive financial assistance” pro-
vided under TARP or any entity that owns 50% or more, or is 50% or more owned
by such an entity.285 In general, the executive compensation restrictions in the
Rule apply only so long as the TARP recipient has an “obligation” to Treasury; an
“obligation” does not include Treasury holding warrants to purchase common stock
of the TARP recipient.286
In general, the Rule defines financial assistance as “any funds or fund com-
mitment provided through the purchase of troubled assets” by Treasury through
a direct financial transaction between Treasury and the TARP participant.287 For
example, CPP participants that directly sell preferred stock to Treasury generally
have received financial assistance under the Rule. However, those institutions that
post collateral to and receive loans from TALF are considered to have not “received
financial assistance provided under TARP” and therefore are not subject to the
Rule.288 Table 2.36 shows a breakdown of how the compensation and governance
standards set forth in the Rule apply to all TARP programs.
TABLE 2.36
INTERIM RULE EXECUTIVE COMPENSATION RESTRICTIONS AS THEY APPLY TO

TARP PROGRAMS
TARP
Program Applicable Notes
All participating institutions are subject to the executive compensation
CPP X
restrictions.
All participating institutions are subject to the executive compensation
CAP X
restrictions.
SSFI X Restrictions apply to AIG.
TIP X Restrictions apply to Citigroup and Bank of America.
AGP X Restrictions apply to Citigroup.
AIFP X Restrictions apply to GM, GMAC, Chrysler, Chrysler Financial.
Executive compensation restrictions apply only to auto companies, not the
ASSP X
suppliers.
Executive compensation restrictions apply only to auto companies, not
AWCP X
automobile purchasers.
TALF Program is not applicable to TALF participants.
Would apply only if there was a majority owner of the Public-Private Invest-
ment Fund (“PPIF”). Since PPIF will be structured so that no entity can invest
PPIP in more than 9.9% of the fund, executive compensation restrictions will
not apply. According to OFS, the luxury expenditure policy will apply to the
recipient.a
MHA Program is exempted by statute.b
UCSB X Restrictions apply only to the institution selling the eligible assets to Treasury.
Notes:
a Treasury, response to SIGTARP draft report, 7/9/2009.
b The Making Home Affordable program is exempted by statute from the executive compensation and corporate governance standards
set forth in the ARRA amendments. See Section 7002 of the American Recovery and Reinvestment Act of 2009, P.L. 111-5,
2/13/2009.
Source: Treasury, “TARP Standards for Compensation and Corporate Governance,” 6/10/2009, www.financialstability.gov, accessed
6/10/2009.
Compensation Limits
The Rule establishes certain compensation requirements by which all TARP recipi-
Senior Executive Officers (“SEOs”): A ents must abide. The number of employees to whom the requirements apply varies;
“named executive officer” of a TARP in general, however, the compensation limitations in the Rule apply to the TARP
recipient as defined under Federal recipient’s senior executive officers (SEOs) and most highly compensated employ-
securities law, which generally includes ees, determined by reference to annual compensation. The Rule defines annual
the principal executive officer (“PEO”), compensation as the dollar value for total compensation as determined pursuant to
principal financial officer (“PFO”), and
applicable Federal securities laws.289
the next three most highly compen-
Different types of compensation are addressed differently in the Rule. For
sated employees.
example, the number of employees for whom bonus payments are limited is based
upon the amount of TARP funding received by the institution.290 The Rule did not
Most Highly Compensated Employee:
The employee of a TARP recipient include the annual compensation limit of $500,000 that had been set forth in the
whose total annual compensation is February 2009 Administration guidance.291 Table 2.37 shows how bonus payments
determined to be the highest among all are applied to each TARP recipient based on funding levels. The specific compen-
employees, where “annual compensa- sation requirements set forth in the Rule, and how each requirement applies to
tion” includes the dollar value for total TARP recipients, are detailed in Table 2.38.
compensation as determined pursuant
to Federal securities laws reduced by
the amount required by the employee’s
defined benefit and pension plans.
TABLE 2.37
EMPLOYEES SUBJECT TO BONUS LIMITATIONS, BY AMOUNT OF TARP FUNDING

Amount of TARP Funding Applicable Employees
< $25,000,000 most highly compensated employee
>$25,000,000 < $250,000,000 at least the 5 most highly compensated employees
>$250,000,000 < $500,000,000 SEOs and 10 next most highly compensated employees
>$500,000,000 SEOs and 20 next most highly compensated employees
Note: The ARRA amendments provide that, with respect to financial institutions that have received greater than $25,000,000 in TARP
assistance, the Secretary may apply the bonus limitations to a higher number of employees as the Secretary may determine is in the
public interest.
Source: Treasury, “TARP Standards for Compensation and Corporate Governance,” 6/10/2009, www.financialstability.gov, accessed
6/10/2009.
TABLE 2.38
COMPENSATION LIMIT REQUIREMENTS

Requirement Definition How Requirement Is Applied To Whom the Requirement Applies
Bonus Payments Bonus, retention award, or incentive Bonus payments are prohibited — except Employees identified in Table 2.37 (based
compensation for payments made in the form of restricted on the level of TARP assistance)
stock (which cannot have a value greater than
1/3 of the employee’s total compensation
and must be forfeitable if the employee does
not continue providing services for the TARP
recipient for at least two years from the date
of grant).
Commissions Payment earned by an employee Commissions meeting the definition in the Rule Employees identified in Table 2.37 (based
consistent with a program in existence are exempt from the limitations on bonuses, on the level of TARP assistance)
for that type of employee as of February retention awards, and incentive compensation;
17, 2009, if a substantial portion of however, fees earned in connection with a
the services provided by the employee specified transaction (e.g., an initial public
consists of the direct sale of a product or offering) are not commissions for purposes of
service to an unrelated customer the Rule.
Excessive Risk Unnecessary risk taking encouraged by Review of employee compensation plans by All TARP recipients
employee compensation plans the compensation committee, a narrative
explanation of the committee’s analysis with
respect to risk, and certification that the
compensation committee has completed the
review.
Clawback Recovery by the company of amounts All bonuses, retention awards, and incentive SEOs and the next 20 most highly
paid to an employee based on materially compensation must be subject to clawback compensated employees
inaccurate performance criteria if the payments were based on materially
inaccurate performance criteria; the TARP
recipient must actually exercise its clawback
rights unless it can demonstrate that it would
be unreasonable to do so.
Golden Parachute Any payment to an employee for Prohibits any and all golden parachute SEOs and the next 5 most highly
departure for any reason, or any payment payments to the applicable employees made compensated employees
due to a change in control at the time of departure or upon a change in
control.
Perquisite Personal benefit, including a privilege Must disclose the amount, nature, and Employees identified in Table 2.37 (based
or profit incidental to regular salary or justification for the perquisite whose value on the level of TARP assistance)
wages exceeds $25,000.
Source: Treasury, “TARP Standards for Compensation and Corporate Governance,” 6/10/2009, www.financialstability.gov, accessed 6/10/2009.
Office of the Special Master for TARP Executive

Compensation
Under the Rule, Treasury has created a new Office of the Special Master for
TARP Executive Compensation (“Special Master”) which will be responsible for
the review and analysis of executive compensation at TARP recipients.292 Treasury
has appointed Kenneth R. Feinberg, a “highly respected mediator widely praised
for his leadership of the September 11th Victim Compensation Fund,” as Special
Master, and he will report to the Assistant Secretary of the Treasury for Financial
Stability.293 The Special Master’s scope is limited to executive compensation and
corporate governance issues under the Rule for TARP recipients. The Special
Master has the authority to accomplish these objectives:294
• review compensation payments and plans at TARP recipients that have received
“exceptional assistance” (for the SEOs and 20 next most highly compensated
employees) and compensation structures (for the 100 most highly compensated
employees and any executive officers)
• review bonuses, retention awards, and other compensation paid before
February 17, 2009, by TARP recipients and, where appropriate, negotiate
reimbursements
• provide advisory opinions with respect to the application of the Rule and
whether compensation payments and plans are consistent with EESA, TARP,
and the public interest
The Rule requires that the Special Master use specific principles when review-
ing compensation payments and plans at TARP recipients:295
• Risk — The compensation structure should avoid incentives for employees to

take unnecessary or excessive risks that could threaten the value of the TARP
recipient, including incentives that reward employees for short-term or tempo-
rary increases in value, performance, or similar measures that may not ultimate-
ly be reflected by an increase in the long-term value of the TARP recipient.
• Taxpayer Return — The compensation structure, and amount payable where
applicable, should reflect the need for the TARP recipient to remain a competi-
tive enterprise, to retain and recruit talented employees who will contribute to
the TARP recipient’s future success, and ultimately to be able to repay TARP
obligations.
• Appropriate Allocation — The compensation structure should appropriately
allocate the components of compensation (e.g., salary, executive pensions,
bonus payments, and incentives). The appropriate allocation may be different
for different positions and for different employees, but generally, in the case of
an executive or other senior-level position, a significant portion of the overall
compensation should be long-term compensation that aligns the interest of the
employee with the interests of shareholders and taxpayers.
• Performance-Based Compensation — An appropriate portion of the com-

pensation should be performance-based over a relevant performance period.
Performance-based compensation should be determined through tailored
metrics that encompass individual performance and/or the performance of the
TARP recipient or a relevant business unit, taking into consideration specific
business objectives.
• Comparable Structures and Payments — The compensation structure
and pay should be consistent with pay for those in similar positions at similar
entities.
• Employee Contribution to TARP Recipient Value — The compensation
structure should reflect the current or prospective contributions of an employee
to the value of the TARP recipient, taking into account multiple factors.
Exceptional Assistance Authority

Under the Rule, the Special Master has specific duties regarding payments and
compensation plans for executives of TARP recipients that have received exception- Exceptional Assistance: Companies
al assistance. For companies receiving exceptional assistance, the Special Master receiving assistance under the pro-
will review compensation payments for the SEOs and the 20 most highly compen- grams for SSFI, TIP, AGP, AIFP, and any
sated employees at each institution. In addition, he will be reviewing compensa- future Treasury program designated by
tion plans for SEOs and the 100 most highly compensated employees (and the the Treasury Secretary as providing ex-
executive officers) of a TARP recipient receiving exceptional assistance. According ceptional assistance. Currently includes
to Treasury, this is to ensure that compensation is fair and structured, to protect AIG, Citigroup, Bank of America, GM,
GMAC, Chrysler, and Chrysler Financial.
taxpayer interests and to promote long-term shareholder value.296
“Look-Back” Authority
The Special Master will also be conducting a “look-back” review of certain pay-
ments at all TARP recipients made prior to February 17, 2009 (i.e., the date of
ARRA’s enactment). The review will cover all bonuses, retention awards, and other
compensation paid to the 5 SEOs and the next 20 most highly paid employees.297
This review will encompass approximately 436 institutions and 10,900 individu-
als.298 Should the Special Master determine that payments were made inappropri-
ately or contrary to the public interest, he will have responsibility for negotiations
with the TARP recipient and the applicable employee for appropriate reimburse-
ment to the Federal Government.299
The American Recovery and Reinvestment Act of 2009 —

Expanded Provisions
The Rule expanded upon three provisions set forth in ARRA. They include review
by the Board Compensation Committee of all employee compensation plans, the
“Say on Pay” requirement, and enhanced luxury expenditure requirements.300
Board Compensation Committee

Under the Rule, each TARP recipient must establish a Board Compensation
Committee (the “Committee”). The Committee must include independent direc-
tors from the company’s board and will convene for the purpose of reviewing all
employee compensation plans. An exception to this requirement is made for TARP
recipients that are not registered under the Securities Exchange Act of 1934 and
have received $25 million or less in TARP assistance. These institutions may
have their boards of directors carry out the duties of the Board Compensation
Committee.301
The Committee is required to meet at least semiannually to review with senior
risk officers the proposed compensation plans of all employees and ensure that the
TARP recipient is not unnecessarily exposed to risks. In addition, the Committee
will evaluate SEO compensation plans to ensure that the plans do not encourage
SEOs to take unnecessary and excessive risks that could threaten the value of the
TARP recipient. The Rule requires that the Committee submit an annual report to
Treasury providing a narrative description of how it limited any features of compen-
sation plans that would encourage SEOs to take unnecessary and excessive risks
and any features of compensation plans that could encourage the manipulation of
reported earnings to enhance the compensation of an employee.302
“Say on Pay”
Say on Pay: A non-binding vote by The Rule provides a provision for a non-binding vote by shareholders on executive
shareholders with respect to the compensation, sometimes referred to as “Say on Pay.” This provision requires all
company’s executive compensation, as TARP recipients to permit an annual non-binding vote by shareholders on execu-
disclosed pursuant to SEC regulations. tive compensation as required by SEC regulations.303
Luxury Expenditures
The Rule also addresses corporate luxury expenses; the Rule states that the board
of directors of any institution receiving TARP funds must have a company-wide
policy to define and prevent excessive expenditure on entertainment or events, of-
fice and facility renovations, aviation or other transportation services, and other ac-
tivities or events that are not reasonable expenditures for the following activities:304
• staff development
• reasonable performance incentives
• other activities conducted in the normal course of business operations
The company must file this policy with Treasury and post it to the company
website no later than (i) 90 days after the closing of the transaction between
Treasury and the TARP recipient or (ii) 90 days following publication of the
Rule.305 The Rule also requires that the PEO and PFO of each institution provide
certification that any expenditures needing approval by a senior executive or the
board of directors have been properly approved.306
Additional Compensation and Governance Standards

According to Treasury, the Rule provides additional requirements that will further
protect shareholder value and increase transparency by all TARP recipients.
In addition to the compensation and corporate governance standards explicitly
required by Congress, the Rule includes three additional requirements: a prohibi-
tion on tax gross-ups, a requirement that TARP recipients provide additional dis-
closure of perquisites, and a requirement that TARP recipients provide disclosure
with respect to compensation consultants.307
Tax Gross-Up
A tax gross-up is typically a specific payment to cover taxes due on certain
compensation. According to Treasury, studies have shown that these payments
cost the companies that provide them far more than the benefits the payments
Tax Gross-Up: A reimbursement
provide to executives. The Rule prohibits TARP recipients from providing any tax
of taxes owed with respect to any
gross-up payments to senior executives and to the next 20 highest-compensated
compensation.
employees.308
Perquisites
In addition to disclosure requirements applicable to perquisites that are already
enforced by the SEC, the Rule subjects TARP recipients to more stringent
requirements. SEC rules require disclosure of perquisites given to the top five
executive officers. The Rule expands this requirement to include perquisites over
$25,000 given to any employees of TARP recipients subject to the bonus limita-
tions described in Table 2.37. Additionally, firms must provide a narrative descrip-
tion and justification for these benefits.309
Compensation Consultants
Many firms hire compensation consultants to determine appropriate pay levels
for top executives. According to Treasury, these consultants may have influence
over the setting of compensation, and it may be helpful for shareholders to know
whether TARP recipients have hired an outside consultant. More specifically, the
Rule requires all TARP recipients to provide a narrative description of the services
provided by such consultants and a description of any benchmarking analysis
performed by the consultants.310
Certifications
As recommended by SIGTARP, the Rule provides certification and reporting
requirements on the compensation and corporate governance guidelines that apply
to TARP recipients. All certifications provided by TARP recipients must name the
SEOs and the 20 most highly compensated employees for the current fiscal year.
Under the Rule, this determination is based on their prior fiscal year’s total annual
compensation. Each certification must also provide a statement by the officer certi-
fying that they “understand that a knowing and willful false or fraudulent statement
made in connection with the certification may be punished by fine, imprisonment,
or both.”311 Table 2.39 describes the reporting and certification requirements and
the frequency with which the institution must provide the certifications.
In addition to the requirements in Table 2.39, those TARP recipients classified
as receiving exceptional assistance must certify to Treasury that they have had their
compensation payments and structures approved by the Special Master as required
by the Rule.312
TABLE 2.39
EXECUTIVE COMPENSATION REPORTING AND CERTIFICATION REQUIREMENTS

Compliance Category Action Requiring Certification Certification Frequency
Board Compensation TARP recipient has created a Board Compensation Committee that meets • Later of 90 days after the closing of the transac-
Committee the requirements of the Rule. tion or 90 days after publication of the Rule
Compensation Plans The Committee has evaluated SEO compensation plans and has identified • Evaluate every 6 months
Excessive Risk and limited features of plans that could lead to unnecessary risks. The • 90 days after the end of each fiscal year — must
committee has also reviewed employee compensation plans for features submit narrative description and certification
that could encourage the manipulation of reported earnings.
Bonus Payments TARP recipient has limited bonus payments to applicable employees • 90 days after the end of each fiscal year
in accordance with Section 111 of EESA and guidance thereunder.
Luxury TARP recipient has established an excessive or luxury expenditures policy, • Later of 90 days after the closing of the transac-
Expenditures and has posted it to the company website, and its employees have com- tion or 90 days after publication of the Rule
plied with the policy. • 90 days after the end of each fiscal year
Say on Pay TARP recipient has permitted a non-binding shareholder resolution on ex- • 90 days after the end of each fiscal year
ecutive compensation (publicly traded TARP recipients only) in accordance
with applicable SEC regulations.
Compensation TARP recipient has disclosed whether an executive compensation consul- • 90 days after the end of each fiscal year
Consultants tant was hired and a description of services provided.
Perquisite TARP recipient has disclosed the amount, nature, and justification for • 90 days after the end of each fiscal year
offering any perquisites greater than $25,000 to each of its employees
subject to bonus limitations (as identified in Table 2.37).
Clawback TARP recipient has required that all bonus payments are subject to re- • 90 days after the end of each fiscal year
covery if the payments were based on materially inaccurate performance
metrics.
Source: Treasury, “TARP Standards for Compensation and Corporate Governance,” 6/10/2009, www.financialstability.gov, accessed 6/10/2009.
TARP IN CONTEXT:
SECT ION 3 FINANCIAL INSTITUTION
SUPPORT AND POLICIES
OUTSIDE OF TARP
This section provides some background on the Federal agencies and financial res-
cue initiatives that have been implemented as part of the Government’s response to
the financial crisis. TARP programs must work in concert with these other agencies
and their initiatives — either as a direct partner, as in the case of the Term Asset-
Backed Securities Loan Facility (“TALF”), or as a potentially overlapping business
alternative for banks requiring funds. Though a huge sum in its own right, the
$700 billion in TARP funding represents only a portion of a much larger sum —
estimated to be as large as $23.7 trillion — of potential Federal Government
support to the financial system. This support is spread among numerous Federal
agencies, with the Federal Reserve System (“Federal Reserve”), providing one of
the largest support packages ($6.8 trillion if each initiative were implemented to its
maximum authorized level).
In an effort to provide context to the environment within which the TARP
programs are operating, this section provides an overview of the Federal Reserve
System and a description of the multiple financial-crisis-response programs
throughout the Federal Government. This section is intended to provide perspec-
tive for understanding TARP. SIGTARP has no oversight responsibility for any of
the programs set forth in this section that do not involve TARP funds. Additionally,
throughout this section, SIGTARP uses the term “potential support” to represent
the maximum amount of support a Government agency has specified that it could
provide under a specific program. In those cases in which there are no specified
maximum thresholds, SIGTARP has used the high-water mark of the program
(the maximum amount actually expended or guaranteed) through June 30, 2009.
Further, some of the programs have been discontinued or even, in some cases, not
utilized. As such, these total potential support figures do not represent a current
total, but the sum total of all support programs announced since the onset of the
financial crisis in 2007.
TARP TUTORIAL: THE FEDERAL RESERVE SYSTEM
The Federal Reserve System is the central bank of the United States and is structured as
a collection of quasi-governmental financial entities. It comprises a Board of Governors,
12 Federal Reserve District Banks, a Federal Open Market Committee, and a number of
advisory councils. Established by the Federal Reserve Act of 1913, the Federal Reserve
oversees monetary policy, supervises and regulates various banking institutions, contains
systemic risk in financial markets, and provides banking services to depository institu-
tions. For an outline of the Federal Reserve System organization, see Figure 3.1.
FIGURE 3.1
THE FEDERAL RESERVE SYSTEM ORGANIZATION
BOARD OF GOVERNORS
7 members --- appointed by the President and confirmed
by the Senate (currently two vacancies)
Members Advises
Broad oversight
FEDERAL OPEN MARKET and appointment of 3 ADVISORY COUNCILS
COMMITTEE (“FOMC”) 3 board members to
each Federal Reserve
7 members from the Board of Federal Advisory Council
Bank board of
Governors
directors
Consumer Advisory Council
5 (out of 12) Federal Reserve
Bank presidents Thrift Institutions Advisory
Council
President of FRBNY is a
permanent member
Appoints Appoints
FEDERAL RESERVE BANKS

12 banks and 25 branches
Each bank has a 9-member

board of directors
Contribute capital & elect 6 board members

to each Federal Reserve Bank
board of directors
MEMBER BANKS
Approximately 3,000 members
(38% of all commercial banks)
Each bank holds stock in its

regional Federal Reserve Bank
(3% of the member bank’s
capital)
Source: Federal Reserve, “FED 101,” no date,

www.federalreserveeducation.org/FED101%5HTML/structure/, accessed 7/8/2009.
The Federal Reserve System: Structure and Key Individuals

The Chairman and Board of Governors
The Board of Governors of the Federal Reserve is a group of seven Members
(“Governors”), nominated by the President and confirmed by the Senate. The Banking
Act of 1935 states that the Board of Governors should have a “fair representation of the
financial, agricultural, industrial, and commercial interests and geographical divisions of the
country,” and no two Governors may come from the same Federal Reserve District.313 Each
Governor’s term is 14 years, and those who have served full terms cannot be reappointed;
however, those appointed to complete an unexpired term may be appointed for the follow-
ing full term. Appointments are staggered so that one term expires on January 31 of each
even-numbered year.314 Currently, there are two vacant seats on the Board of Governors.
The Chairman of the Board is chosen by the President and must be confirmed by the
Senate. The Chairman serves terms of four years and may be reappointed as Chairman
until his or her terms as a Governor expire. Currently, the Chairman of the Board of
Governors is Ben Bernanke. Sworn in as Chairman on February 1, 2006, his term on the
Board of Governors will expire in 2020,315 although his term as Chairman will expire on
January 31, 2010, unless reappointed.
Federal Open Market Committee

The Federal Open Market Committee (“FOMC”) is the other primary policymaking body of
the Federal Reserve System, responsible for Open Market Operations (“OMOs”). These
OMOs are the principal tool of monetary policy, comprising purchases and sales of U.S.
Government and Federal agency securities that are used to affect bank reserves and,
in turn, the cost and availability of money and credit in the U.S. economy. The FOMC
specifies a short-term objective for the OMOs. These policy targets change from time to
time, but the current objective of the FOMC is to stabilize the federal funds rate around a
target interest rate. The FOMC instructs the Federal Reserve Bank of New York (“FRBNY”)
to engage in OMOs as appropriate to keep the federal funds rate near the target. Such Federal Funds Rate: The rate at
activity either contracts or expands the supply of bank reserves until the federal funds rate which depository institutions lend to
each other overnight to fill immediate
nears the target, directly affecting interest rates. Of the Federal Reserve banks, FRBNY
shortages.
has a preeminent role in executing monetary policy, particularly in its role as the executing
institution of FOMC directives.
Traditionally, monetary policy has been conducted by changing the target federal funds
rate. Lower interest rates tend to stimulate the economy, while higher interest rates tend
to temper growth and inflationary pressures.
TARP TUTORIAL: THE FEDERAL RESERVE SYSTEM

TABLE 3.1
2009 FOMC MEMBERS

Member Title(s)
Ben S. Bernanke Chairman, Board of Governors
Vice Chairman, Board of Governors; President, Federal
William C. Dudley
Reserve Bank of New York
Elizabeth A. Duke Member, Board of Governors
Charles L. Evans President, Federal Reserve Bank of Chicago
Donald L. Kohn Member, Board of Governors
Jeffrey M. Lacker President, Federal Reserve Bank of Richmond
Dennis P. Lockhart President, Federal Reserve Bank of Atlanta
Daniel K Tarullo Member, Board of Governors
Kevin M. Warsh Member, Board of Governors
Janet L. Yellen President, Federal Reserve Bank of San Francisco
Note: As of 6/30/2009 two board member positions are currently vacant.
Source: Board of Governors of the Federal Reserve System, www.federalreserve.gov/monetarypolicy/fomc.htm, accessed

6/29/2009.
The FOMC comprises 12 voting members: the 7 members of the Board of Governors,
the president of FRBNY, and 4 of the other 11 Federal Reserve Bank presidents, who
serve one-year terms on a rotating basis. Table 3.1 details the current members of the
FOMC.
FOMC meetings are held at regular intervals of five to eight weeks. The staff prepares
policy papers for discussion and committee members discuss options in detail. Decisions
may only be implemented, however, after reaching consensus. FOMC policy directives are
then referred to FRBNY for execution.
Federal Reserve Banks

There are 12 Federal Reserve Banks, one in every Federal Reserve District, each of which
is headed by a President. For a map detailing the 12 Federal districts and the location of
the Federal Reserve Banks, see Figure 3.2. For a listing of the current Presidents of the
Federal Reserve Banks, see Table 3.2.
The individual Federal Reserve Banks are “owned” by the private, commercial banks in
their districts. This ownership is, however, very different from the private-sector concept
of stock ownership; the shareholders cannot sell their stock, they cannot vote, and they
cannot receive dividends.
FIGURE 3.2
MAP OF FEDERAL RESERVE BANKS AND THEIR DISTRICT BOUNDARIES
9 Minneapolis
1 Boston
2 New York
7 Chicago 3 Philadelphia
12 San Francisco
4 Cleveland
10 Kansas City 8 St. Louis
5 Richmond
6 Atlanta
11 Dallas
Note: Alaska and Hawaii are part of the San Francisco District.
Source: Federal Reserve, www.federalreserve.gov/otherfrb.htm, accessed 6/30/2009.

TABLE 3.2
FEDERAL RESERVE BANKS AND THEIR

LEADERSHIP
Independence of the Federal Reserve System District President
The Federal Reserve Board of Governors is an independent agency of the Federal 1st District — Boston Eric S. Rosengren
Government. The individual Federal Reserve banks are not agencies of the Federal 2nd District — New York William C. Dudley
Government. 316
Congressional oversight requires that the Chairman of the Board of 3rd District — Philadelphia Charles I. Plosser
Governors of the Federal Reserve appear twice before Congress each year to testify on 4th District — Cleveland Sandra Pianalto
5th District — Richmond Jeffrey M. Lacker
the subject of the Federal Reserve’s monetary policy. Congress may also enact changes
6th District — Atlanta Dennis P. Lockhart
in the Federal Reserve Act to affect long-term Federal Reserve policies and priorities. The
7th District — Chicago Charles L. Evans
Federal Reserve is a hybrid entity with characteristics of both public and private organiza-
8th District — St. Louis James B. Bullard
tions. Its independence is an important feature, designed to protect the monetary base 9th District — Minneapolis Gary H. Stern
and the financial system oversight from “politicization.” 10th District — Kansas City Thomas M. Hoenig
11th District — Dallas Richard W. Fisher
Taxpayer Exposure to the Federal Reserve
12th District — San Francisco Janet L. Yellen
As the Federal Reserve has been providing liquidity to financial institutions during the
Source: Federal Reserve, “Federal Reserve Presidents,” www.federal-
current crisis, it has increased its exposure to potential for losses, such as if the value of reserve.gov, accessed 6/30/2009.
the collateral posted for non-recourse loans were to fall below the loan amount. Although
taxpayers are not directly liable to make up any losses of the Federal Reserve, in practice,
the American public is exposed in many ways to the effects of Federal Reserve actions.
To a certain extent, losses can be absorbed by the Federal Reserve in the course of
its ongoing business. The Federal Reserve derives revenues from interest on outstanding
loans to banks and from fees for services. In 2008, the Federal Reserve had a surplus of
$35 billion, which it remitted to Treasury.317 If Federal Reserve losses exceeded a certain
level — for example, the amount of the Federal Reserve’s annual revenues — further
funds would be required to meet those losses.
As a central bank, however, the Federal Reserve has other options that are not open
to the typical private-sector business. Losses up to a point can be covered by such means
as assessments on member banks, increases in interest rates on Federal Reserve loans,
or fee increases. These efforts would indirectly affect taxpayers, however, because the
banks could increase consumer fees or interest rates to compensate for the Federal
Reserve assessments.
A major financial shortfall at the Federal Reserve could lead to either an appropriation
by Congress of taxpayer funds for a bailout or an expansion of the money supply (“running
the printing press”) to cover Federal Reserve losses, which could lead to inflation.
The Federal Reserve’s Role in Addressing the Current

Financial Crisis
In the current financial crisis, the Federal Reserve has initiated a number of programs
to provide liquidity to the financial system, including engaging in large-scale asset pur-
chases, which has resulted, since January 2007, in a $1.2 trillion expansion of its balance
sheet and a number of regulatory changes intended to reduce stress on the financial
system.318 The Federal Reserve has also created new standby credit facilities and loan
guarantees, and has engaged in “quantitative easing” (lowering interest rates to provide
banks with additional profits through larger spreads). The role of the Federal Reserve in
the Government’s response to the financial crisis is covered in more detail in the “TARP in
Context: Other Government Programs To Assist the Financial Sector” discussion following
this section of the report.
Oversight and Authority

The legal authority to undertake efforts to stabilize the economy was provided by Exact Language of Section 13(3) of
Congress in the Federal Reserve Act of 1913. A certain level of balance sheet activity the Federal Reserve Act:
will always be occurring during the Federal Reserve’s normal operations, but the activity 13(3) Discounts for Individuals,
in 2008 was extraordinary by any measure. Congress receives regular reports from the Partnerships, and Corporations
Federal Reserve and has occasionally enacted legislation designed to accomplish certain In unusual and exigent circumstances,
the Board of Governors of the Federal
economic and financial policy goals.
Reserve System, by the affirmative
Section 13 of the Federal Reserve Act (“Section 13”) details the powers of the Federal vote of not less than five members,
Reserve Banks. In 1932, the Emergency Relief and Construction Act added paragraph 3 may authorize any Federal reserve
to Section 13, opening the Federal Reserve’s discount window to nonbanks “in unusual bank, during such periods as the
said board may determine, at rates
and exigent circumstances.”319 Section 13(3) of the Federal Reserve Act is an “emergency
established in accordance with the
clause,” which provides the Federal Reserve with broad powers to take actions necessary provisions of section 14, subdivision
to protect the U.S. financial system. Portions of Section 13 were used during the Great (d), of this Act, to discount for any in-
Depression and for almost 20 years thereafter to provide credit from the Federal Reserve dividual, partnership, or corporation,
to nonbanking businesses. In 1991, Section 13(3) was invoked to provide a $25 billion notes, drafts, and bills of exchange
when such notes, drafts, and bills of
direct loan from the Federal Reserve to the FDIC’s Bank Insurance Fund as a response
exchange are endorsed or otherwise
to the Savings and Loan Crisis of the 1980s and 1990s. Section 13(3) was amended secured to the satisfaction of the
in 1991, allowing the Federal Reserve to lend directly to securities firms during financial Federal Reserve bank: Provided,
emergencies. Between 1991 and 2008 Section 13(3) was not invoked.320 Since 2008, the that before discounting any such
note, draft, or bill of exchange for an
Federal Reserve’s lending under Section 13(3) includes: loans to JPMorgan Chase & Co.
individual, partnership, or corporation
(“JPMorgan”) to facilitate the acquisition of Bear Stearns Companies Inc. (“Bear Stearns”); the Federal reserve bank shall obtain
a loan to American International Group, Inc. (“AIG”), a diversified financial company, which evidence that such individual, partner-
is not normally under the Federal Reserve’s discount window authority; and the creation ship, or corporation is unable to
secure adequate credit accommoda-
of the TALF. For a complete list of recent, known Section 13(3)-related Federal Reserve
tions from other banking institutions.
lending, see Table 3.3. All such discounts for individuals,
partnerships, or corporations shall be
subject to such limitations, restric-
tions, and regulations as the Board
of Governors of the Federal Reserve
System may prescribe.
Discount Window: Federal Reserve

facility that lends short-term money
directly to eligible institutions.
TABLE 3.3
RECENT KNOWN AUTHORIZATIONS UNDER SECTION 13(3) ($ BILLIONS)

Authorized
Date Program Upper Limit* End Date Comments
3/11/2008 TSLF $250.0 2/1/2010 Subsequently modified to include TSLF TOP (Options Program)
3/14/2008 Bear Stearns Bridge 12.9 Repaid
Loan 3/17/2008
3/16/2008 PDCF ≥147.7 2/1/2010 Covers primary dealers — in September 2008, extended to include
broker/dealer subsidiaries of the primary dealers
3/16/2008 Maiden Lane LLC 29.8 To facilitate purchase by JPMorgan of Bear Stearns
(Bear Stearns Acquisi-
tion Loan)
9/16/2008 AIG Revolving Credit 85.0 For: AIG; reduced to $60 billion in November 2008
Facility
9/19/2008 AMLF/Non-depository ≥145.9 2/1/2010 13(3) was needed to bring non-depository institutions into program
Institutions
10/7/2008 CPFF 1,800.0 2/1/2010
10/8/2008 AIG Securities Lending 37.8 12/12/2008 For: AIG. Paid off and terminated on 12/12/2008
Program
10/21/2008 MMIFF 600.0 10/30/2009 Eligibility expanded in January 2009 — unused, as of 6/30/2009
11/10/2008 Maiden Lane II 22.5 For: AIG
11/10/2008 Maiden Lane III 30.0 For: AIG
11/23/2008 Residual Financing for 220.4 For Citigroup: “Ring-Fence”
Citigroup Designated
Asset Pool
11/24/2008 TALF 1,000.0 12/31/2009 There have been several expansions
1/15/2009 a
Residual Financing for For: Bank of America “Ring-Fence”
Bank of America Des-
ignated Asset Pool b
3/2/2009 c AIG Securitization of 8.5d For: AIG, loans secured by life
Life Insurance Cash insurance cash flows
Flows (“SLICF”)
Total $4,390.5
Notes: Numbers affected by rounding. In certain occasions, Section 13(3) was invoked multiple times for a single program.
*Authorized limits do not account for any collateral pledged; “≥” reflects programs that did not specify upper limit — in such cases high-water mark of program is used.
a
Based on Citigroup Master Agreement date of 1/15/2009.
b
The residual financing arrangement for Bank of America has not been executed as of 6/30/2009.
c
Based on press release date of 3/2/2009.
d
The authority for this facility was invoked separately from the revolving credit facility for AIG.
Sources: Federal Reserve Report to Congress, www.federalreserve.gov, 6/26/2009, accessed 7/1/2009; TSLF– Congressional Budget Office, “The Budget and Economic Outlook: Fiscal Years
2009-2019,” p. 37, www.cbo.gov/doc.cfm?index=9957&type=3, accessed 7/9/2009; PDCF–Technically unlimited potential, although usage peaked on 10/1/2008 at $147.7 billion; St. Louis Federal
Reserve Bank, “Factors Affecting Reserve Balances,” www.research.stlouisfed.org/fred2/categories/32215/downloaddata, accessed 7/9/2009; Bear Stearns Bridge Loan–Initial outlay of 3/14/2008–
3/16/2008 repaid on 3/17/2009; Federal Reserve, “Report Pursuant to Section 129 of the Emergency Economic Stabilization Act of 2008: Bridge Loan to The Bear Stearns Companies Inc. Through
JPMorgan Chase Bank,” no date, www.federalreserve.gov/monetarypolicy/files/129bearstearnsbridgeloan.pdf, accessed 6/11/2009; Maiden Lane– Initial outlay peaked on 7/2/2008 at $29.8 billion;
St. Louis Federal Reserve Bank, ”Factors Affecting Reserve Balances,” www.research.stlouisfed.org/fred2/categories/32215/downloaddata, accessed 7/9/2009; AIG Revolving Credit/AIG Securi-
ties–Prior to restructuring of assistance, Federal Reserve assistance to AIG peaked at $122.5 billion between two programs, an $85 billion credit facility and a $37.5 billion securities lending facility;
AMLF–Week ending 10/8/2008; St. Louis Federal Reserve, ”Factors Affecting Reserve Balances,” research.stlouisfed.org/fred2/data/WABCMMF.txt, accessed 7/9/2009; AMLF second source–FDIC,
Supervisory Insights, Summer 2009, www.fdic.gov/regulations/examinations/supervisory/insights/sisum09/si_sum09.pdf, accessed 7/9/2009, p. 4; MMIFF/SPV–Federal Reserve, “Credit and Liquidity
Programs and the Balance Sheet,” www.federalreserve.gov, accessed 7/1/2009; MMIFF second source — Congressional Budget Office, “The Budget and Economic Outlook: Fiscal Years 2009-2019,”
p. 36, www.cbo.gov/doc.cfm?index=9957&type=3, accessed 7/9/2009; MMIFF third source–FDIC, Supervisory Insights, Summer 2009, p. 4, www.fdic.gov/regulations/examinations/supervisory/
insights/sisum09/si_sum09.pdf, accessed 7/9/2009; CPFF– FDIC, Supervisory Insights, Summer 2009, p. 4, www.fdic.gov/regulations/examinations/supervisory/insights/sisum09/si_sum09.pdf,, ac-
cessed 7/9/2009; AGP Credit–Citigroup Master Agreement, 1/15/2009; AGP Credit second source–Federal Reserve, response to SIGTARP draft report, 1/29/2009. Source for invocation date–Federal
Reserve, “Periodic Report Pursuant to Section 129(b) of the Emergency Economic Stabilization Act of 2008: Update on Outstanding Lending Facilities Authorized by the Board Under Section 13(3) of
the Federal Reserve Act, 6/26/2009, www.federalreserve.gov/monetarypolicy/files/129periodicupdate06262009.pdf, accessed 7/9/2009; Maiden Lane III–Federal Reserve, “H.4.1 Release – Factors
Affecting Reserve Balances,” 6/26/2009, www.federalreserve.gov, accessed 7/1/2009; Federal Reserve Board, Monetary Report to Congress, Appendix A, 2/24/2009, www.federalreserve.gov/
monetarypolicy/mpr_20090225_appendixa.htm, accessed 5/14/2009; TALF–“Credit and Liquidity Programs and the Balance Sheet,” www.federalreserve.gov, accessed 7/1/2009;Treasury, “Financial
Stability Plan Fact Sheet,” www.treas.gov, accessed 1/16/2009; Maiden Lane II, Federal Reserve Board, Monetary Report to Congress, Appendix A, 2/24/2009, www.federalreserve.gov/monetary-
policy/mpr_20090225_appendixa.htm, accessed 5/14/2009; AIG SLICF–Federal Reserve Press Release, ” U.S. Treasury and Federal Reserve Board Announce Participation in AIG Restructuring Plan,”
3/2/2009, www.federalreserve.gov, accessed 7/1/2009.
TARP IN CONTEXT: OTHER GOVERNMENT

PROGRAMS TO ASSIST THE FINANCIAL SECTOR
By itself, the Troubled Asset Relief Program (“TARP”) is a huge program at $700
billion. As discussed in SIGTARP’s April Quarterly Report, the total financial
exposure of TARP and TARP-related programs may reach approximately $3 trillion.
Although large in its own right, TARP is only a part of the combined efforts of the
Federal Government to address the financial crisis. Approximately 50 initiatives
or programs have been created by various Federal agencies since 2007 to provide
potential support totaling more than $23.7 trillion.
The Federal Reserve has been one of the lead agencies responding to the finan-
cial crisis — increasing its balance sheet to more than $2 trillion to implement a
wide range of programs designed to stimulate liquidity in financial markets, as well
The Federal Reserve balance sheet
as several institution-specific interventions.321 The Federal Reserve’s $2 trillion bal-
represents the assets that the Federal
ance sheet (which grew from approximately $900 billion prior to the financial crisis
Reserve has acquired as it has put
to a peak of nearly $2.3 trillion in December 2008),322 however, does not reflect the
resources into the financial sector. The
true potential amount of support the Federal Reserve has provided to those pro- assets on the Federal Reserve’s bal-
grams, which is estimated to be at least $6.8 trillion. This is because many of the ance sheet are the tools it employs to
programs involve guarantees that, although not listed on the balance sheet, expose manage liquidity in the economy.
the Federal Reserve to significant losses if the assets they are backing deteriorate in
value.
Other players in the Government’s efforts include the Federal Deposit
Insurance Corporation (“FDIC”), which has contributed more than $2 trillion in
new gross potential support. The newly created Federal Housing Finance Agency
(“FHFA”) — under whose auspices fall the Government-Sponsored Enterprises
(“GSEs”) such as Fannie Mae, Freddie Mac, and Federal Home Loan Banks
(“FHLBs”) — has effectively provided more than $6 trillion in gross potential
support. Meanwhile, Treasury itself has programs outside of those authorized
under the Emergency Economic Stabilization Act (“EESA”), and has supplied
potential support beyond TARP of approximately $4.4 trillion. An overview of the
Government’s new potential support relating to the financial crisis is listed by
Federal agency in Table 3.4.
Of this $23.7 trillion in assistance to financial institutions, participants in
non-TARP programs are not subject to TARP’s restrictions and conditions, such as
executive compensation, nor do they necessarily require specific Congressional ap-
proval. Although SIGTARP’s oversight responsibility is for the operations of TARP
and directly related programs (such as TALF and the Public-Private Investment
Program (“PPIP”)), it is necessary to understand the larger context in which
TARP operates, the linkages between TARP and the trillions of dollars of other
Government initiatives. As noted earlier, SIGTARP has no authority over any of the
non-TARP activities of the agencies discussed below.
TABLE 3.4
INCREMENTAL FINANCIAL SYSTEM SUPPORT, BY FEDERAL AGENCY

SINCE 2007 ($ TRILLIONS)
Maximum Total Potential
Current Balance as of Support
Balance 6/30/2009 Related to Crisis
Federal Reserve $1.4 $3.1 $6.8
FDIC 0.3 0.3 2.3
Treasury — TARP (including
Federal Reserve, FDIC 0.6 0.6 3.0
components)
Treasury — Non-TARP 0.3 0.3 4.4
Other: FHFA, NCUA, GNMA, FHA, VA 0.3 0.3 7.2
Total $3.0 $4.7 $23.7
Notes: Numbers affected by rounding. Amounts may include overlapping agency liabilities, “implied” guarantees, and unfunded
initiatives. Total Potential Support does not account for collateral pledged. See the “Methodology for Estimating Government Financial
Exposure” discussion in this section for details on the methodology of this chart. Other agencies include: FHFA, National Credit Union
Administration (“NCUA”), Government National Mortgage Association (“GNMA”), Federal Housing Administration (“FHA”), and U.S.
Department of Veterans Affairs (“VA”).
Source: See respective source notes in the agency-specific tables later in this section.
Methodology for Estimating Government Financial Exposure

No official financial statements have been prepared for the combined efforts of
the Federal Government in its response to the financial crisis. The estimates in
this section are designed to suggest the scale and scope of those efforts and not to
provide a firm financial statement. These numbers may have some overlap, and
have not been evaluated to provide an estimate of likely net costs to the taxpayer.
Available data has been broken down into the following categories:
• Current Balance — the amount that has been expended on bank rescue efforts
and that is currently outstanding.
• Maximum Balance to Date — the highest balance a program has reached in
its history to date. Many programs reached their peak in December 2008 and
are now declining. Comparing the maximum balance to the current balance
provides a sense of how far past the high-water mark a program might be. The
sum for each Federal agency reflects the sum of the individual high-water marks
for each program under its supervision.
• Total Potential Support — quantifies the gross, not net, exposure that an agency
would face should all eligible program applicants request assistance at once to
the maximum permitted under the program guidelines. Note that many of these
programs are collateralized or have not been drawn down to their full authorized
levels, and as such, the actual potential for losses is likely to be lower. In certain
cases, programs included have been canceled or repaid; however, they are still
included in this table (SIGTARP’s intent is to represent all support programs
created).
The program listings in this section are not comprehensive — there are dozens
of smaller programs, regulations, statutes, and procedures of individual agen-
cies that are not captured in the following tables. Also, there is potential for some
double-counting of exposure in instances where different Federal agencies provide
guarantees for the same financial institutions (such as the overlapping exposure by
Treasury, the Federal Reserve, and FHFA to the GSEs).
Other Federal Responses: Beyond TARP

The Federal Government has undertaken dozens of initiatives, some of them
involving specific programs with specific spending limits and others without any
specific, quantifiable measurement appearing in the books of the responsible
agency. Examples of the latter include the increase in deposit insurance instituted
by FDIC, or the action by the Federal Reserve to pay interest on reserves held by
banks at the Reserve Banks.323 To the extent possible, SIGTARP has quantified
the total exposure of these programs using publicly available information from the
Federal agencies responsible for the programs or initiatives. Following each table
are brief descriptions of key programs implemented by the agencies. The descrip-
tions reflect the agencies’ own descriptions of their programs. Note that the TARP-
related programs, such as TALF and PPIP, are not included as they are addressed
in other sections of this report.
Federal Reserve System

As the central bank of the United States, the Federal Reserve has exceptional
responsibilities and powers to deal with systemic financial crises. See the previous
discussion “TARP Tutorial: The Federal Reserve System” in this report. The Federal
Reserve has created 18 financial support programs outside of its TARP-related
programs, as listed in Table 3.5.
TABLE 3.5
NON-TARP GOVERNMENT SUPPORT OF THE FINANCIAL SECTOR — FEDERAL RESERVE SYSTEM ($ BILLIONS)
Maximum
Balance Total Potential
Current as of Support Related
Program Coverage Balance 6/30/2009 to Crisis*
Term Auction Facility (“TAF”) Banks $282.8 $493.1a $900.0b
Primary Credit (“Discount Program Modification”) Banks 39.1 111.9c ≥ 111.9
Tri-Party Repurchase Agreements Banks — 124.6 d
≥ 124.6
Commercial Paper Funding Facility (“CPFF”)*** Corporate Debt Markets 128.1 349.9e 1,800.0f
Money Market Investor Funding Facility (“MMIFF”) Money Market Mutual — — 600.0g
Funds
Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Money Market Mutual 16.7 145.9h ≥ 145.9
Facility (“AMLF”)*** Funds
Term Securities Lending Facility (“TSLF”), TSLF Options Program Primary Dealers 8.0 233.6i 250.0j
(“TOP”)**
Expansion of System Open Market Account (“SOMA”) Securities Primary Dealers 14.7l 25.9m 32.0n
Lendingk
Primary Dealer Credit Facility (“PDCF”), credit to other primary Primary Dealers — 147.7o ≥ 147.7
dealers***
Purchase of Direct Obligations of GSEs GSEs 92.1 92.1p 200.0q
Purchase of GSE Guaranteed Mortgage-Backed Securitiesr GSEs 467.1 467.1s 1,250.0t
Foreign Central Bank Currency Liquidity Swaps U.S. Markets 121.6 582.8u 755.0v
Treasuries Purchase Program Private Credit Markets 174.5 174.5w 300.0x

Credit to AIG Specific Institution 42.6 89.5y 122.8z
Maiden Lane LLC (Bear Stearns)*** Specific Institution 25.9 29.8aa 29.8
Maiden Lane II LLC (AIG)*** Specific Institution 16.0 20.1 bb
22.5cc
Maiden Lane III LLC (AIG)*** Specific Institution 20.1 28.1dd 30.0ee
Other Credit Extensions (JPMorgan, Bear Stearns bridge loan)** Specific Institution — 12.9 ff
12.9
Total $1,449.3 $3,129.5 ≥$6,835.1
Notes: Numbers affected by rounding; if only one source is given for “Current Balance” and “Maximum Balance,” it is the same source for both.
*Total Potential Support does not account for any collateral pledged; “≥” reflects programs that did not specify upper limit — in such cases high-water mark of program is used as total potential support.
**Denotes program that has been canceled or completed
***Current and maximum balances for CPFF, AMLF, PDCF, and Maiden Lane LLCs are derived from value of collateral held, which is approximately the loan amounts outstanding.
(Sources on next page)

Sources:
a
Week ending 3/11/2009: St. Louis Fed, www.research.stlouisfed.org/fred2/series/WTERAUC?rid=20.
b
Federal Reserve Press Release, 10/6/2008, www.federalreserve.gov/newsevents/press/monetary/20081006a.htm, accessed 6/8/2009.
c
Week ending 10/29/2008: St. Louis Fed, www.research.stlouisfed.org/fred2/series/WPC?rid=20, accessed 6/8/2009.
d
Week ending 6/18/2008: St. Louis Fed, www.research.stlouisfed.org/fred2/series/WREPO, accessed 6/30/2009.
e
Week ending 1/21/2009: St. Louis Fed, www.research.stlouisfed.org/fred2/data/WCPFF.txt, accessed 6/30/2009.
f
FDIC, Supervisory Insights, Summer 2009, p. 4.
g
Congressional Budget Office, “The Budget and Economic Outlook: Fiscal Years 2009-2019, p. 36; FDIC, Supervisory Insights, Summer 2009, p. 4.
h
Week ending 10/8/2008: St. Louis Fed, www.research.stlouisfed.org/fred2/data/WABCMMF.txt; FDIC, Supervisory Insights, Summer 2009, p. 4.
i
Week ending 10/1/2008: St. Louis Fed, www.research.stlouisfed.org/fred2/series/WTERFAC?rid=20, accessed 6/30/2009.
j
Congressional Budget Office, “The Budget and Economic Outlook: Fiscal Years 2009-2019, p. 37.
k
Maximum $5 billion per primary dealer; Fed’s primary dealer list shows 16 dealers (www.newyorkfed.org/markets/pridealers_current.html). Limit was increased from $3 billion to $5 billion per dealer in
2008 (www.newyorkfed.org/markets/sec_announcements.html), increasing maximum amount to $80 billion from $48 billion.
l
Federal Reserve, Statistical Release H.4.1, 6/4/2009, www.federalreserve.gov/releases/h41/current/h41.htm#h41tab9, accessed 6/7/2009.
m
Maximum amount is net SOMA securities lending allowed (new maximum minus old maximum). Federal Reserve, Federal Reserve Statistical Release H.4.1, 6/4/2009, www.federalreserve.gov/releases/
h41/current/h41.htm#h41tab9, accessed 6/8/2009; historical data, www.federalreserve.gov/releases/h41/hist/h41hist1.pdf, accessed 6/11/2009.
n
SOMA figures for “total exposure” are net of pre-existing exposure. To estimate a total exposure of $32 billion, the increased facility of $2 billion per firm was multiplied by the 16 firms in the industry;
historical data, www.federalreserve.gov/releases/h41/hist/h41hist1.pdf, accessed 6/11/2009.
o
Technically unlimited potential; though usage peaked on 10/1/2008 at $147.7 billion. St. Louis Fed, www.research.stlouisfed.org/fred2/categories/32215/downloaddata, accessed 6/30/2009.
p
Week ending 6/3/2009: St. Louis Fed, www.research.stlouisfed.org/fred2/categories/32215/downloaddata; additional data on total of purchases of GSE debt from 9/19/2009 through 5/14/2009,
source: Federal Reserve Bank of New York Agency OMO program, www.newyorkfed.org/markets/pomo/display/index.cfm, accessed 6/28/2009.
q
Federal Reserve Board Press Release, 3/18/2009, federalreserve.gov/newsevents/press/monetary/20090318a.htm, accessed 5/15/2009.
r
Federal Reserve Bank of New York, “FAQ’s: MBS Purchase Program,” www.newyorkfed.org/markets/mbs_faq.html, accessed 5/18/2009.
s
Week ending 5/27/2009: St. Louis Fed, www.research.stlouisfed.org/fred2/categories/32215/downloaddata; additional data on total of gross purchases of Agency MBS, through 5/13/2009, source:
Federal Reserve Bank of New York, Agency Mortgage-Backed Securities Purchase Program, www.newyorkfed.org/markets/mbs/, accessed 6/28/2009.
t
Federal Reserve Board Press Release, 3/18/2009, federalreserve.gov/newsevents/press/monetary/20090318a.htm, accessed 5/15/2009.
u
Week ending 12/10/2008: St. Louis Fed, www.research.stlouisfed.org/fred2/categories/32215/downloaddata, accessed 7/8/2009.
v
Federal Reserve Press Releases: 10/29/2008, www.federalreserve.gov/newsevents/press/monetary/20081029b.htm, accessed 6/9/2009; 10/28/2008, www.federalreserve.gov/newsevents/press/
monetary/20081028a.htm, accessed 6/9/2009; 10/28/2008, www.federalreserve.gov/newsevents/press/monetary/20081028a.htm, accessed 6/9/2009; 9/29/2008, www.federalreserve.gov/
newsevents/press/monetary/20080929a.htm, accessed 6/9/2009.
w
Data derived from taking the increase of U.S. Treasury securities held from 3/18/2009 (date of program announcement) to 6/3/2009 to data source: St. Louis Fed, www.research.stlouisfed.org/fred2/
categories/32215/downloaddata, accessed 6/11/2009.
x
Federal Reserve, FOMC statement, 3/18/2009, www.federalreserve.gov/newsevents/press/monetary/20090318a.htm, accessed 6/8/2009.
y
z
Prior to restructuring of assistance, Fed assistance to AIG peaked at $122.8 billion between two programs — an $85 billion credit facility and a $37.8 billion securities lending facility. Federal Reserve
Board, Monetary Report to Congress, Appendix A, 2/24/2009, www.federalreserve.gov/monetarypolicy/mpr_20090225_appendixa.htm, accessed 5/14/2009.
aa
Initial outlay peaked on 7/2/2008 at $29.8 billion. St. Louis Fed, www.research.stlouisfed.org/fred2/categories/32215/downloaddata, accessed 6/26/2009.
bb
cc
Federal Reserve Board, Monetary Report to Congress, Appendix A, 2/24/2009, www.federalreserve.gov/monetarypolicy/mpr_20090225_appendixa.htm, accessed 5/14/2009.
dd
Week ending 12/24/2008: St. Louis Fed, www.research.stlouisfed.org/fred2/categories/32215/downloaddata.
ee
Federal Reserve Board, Monetary Report to Congress, Appendix A, 2/24/2009, www.federalreserve.gov/monetarypolicy/mpr_20090225_appendixa.htm, accessed 5/14/2009.
ff
Initial outlay of March 14–16, 2008; repaid on March 17, 2009; source: Federal Reserve, Report Pursuant to Section 129 of the Emergency Economic Stabilization Act of 2008: Bridge Loan to The Bear
Stearns Companies Inc. Through JPMorgan Chase Bank, N.A., www.federalreserve.gov/monetarypolicy/files/129bearstearnsbridgeloan.pdf, accessed 6/11/2009.
Term Auction Facility (“TAF”) — Total Potential Support: Approximately

$900 Billion
The Term Auction Facility (“TAF”) allows banks to borrow funds simply by putting
up collateral. It is an alternative to the Federal Reserve’s discount window, which is
the means by which banks have historically raised funds in an emergency. Because
of its association with emergencies, borrowing at the discount window in the past
has carried a certain stigma. TAF, by contrast, is an ordinary lending program, and
its use is perceived less as a sign of weakness.
TAF was created in December 2007 by the Federal Reserve Board of Governors
to meet the short-term liquidity needs of banks. The Federal Reserve claimed that
“by increasing the access of depository institutions to funding, the TAF has sup-
ported the ability of such institutions to meet the credit needs of their customers.”
Technically, the funds are borrowed by banks in an auction that sets the inter-
est rate. The bank must be in “generally sound financial condition,” and it must
post collateral — such as high-quality notes — that are subject to certain haircuts.
Thus, a bank may borrow, for example, $0.92 after posting $1.00 worth of securi-
ties. The minimum interest rate a bank may bid is the interest rate paid by the
Federal Reserve on excess reserve balances. Typically, the Federal Reserve conducts
FIGURE 3.3
regular auctions of 28- and 84-day funds for $150 billion at a time.324 Banks
BANKS HAVE BORROWED FROM may not necessarily have been using the funds they have borrowed from TAF to
THE FEDERAL RESERVE — AND
make new loans to consumers. According to the Federal Reserve’s weekly statisti-
INCREASED THEIR RESERVES AT
THE SAME TIME cal releases (Table Z.1 - Flow of Funds Accounts), the banks have, in aggregate,
$ Billions been adding the cash to their reserves at the Federal Reserve. See Figure 3.3 for a
comparison of bank borrowings from the Federal Reserve (which are predominantly
$1000 through TAF), versus the cash that the banks have placed as reserves at the Federal
Reserve.
800
600 Primary Credit Program (the “Discount Program Modification”) — Total Potential
Support: At Least $111.9 Billion
400 Primary credit loans are taken by banks at the Federal Reserve’s discount window
when they require short-term funds to meet the needs of their customers and credi-
200
tors. Normally, the Federal Reserve lends at a fixed rate and the bank must post
0 suitable collateral, subject to a haircut. In August 2007, the Federal Reserve set the
Q4 Q1 Q2 Q3 Q4 Q1
term at 30 days and approved a 50-basis-point reduction in the primary credit rate
2007 2008 2009
to narrow the spread to 50 basis points, or 0.5%, in response to the liquidity crisis
Federal Reserve Borrowing
Bank Reserves in the banking system. Accessibility was broadened in March 2008, as the interest
rate was lowered to 25 basis points over the FOMC target federal funds rate, and
Source: Federal Reserve Board, Statistical Release Z.1, “Flow of
Funds Accounts of the United States,” Table L.108, 6/11/2009.
the term has been lengthened from 30 to 90 days, renewable by the borrower.325
Tri-Party Repurchase Agreements (“Repo’s”) — Total Potential Support:

At Least $124.6 Billion
According to the Federal Reserve, “repurchase agreements reflect some of the
Federal Reserve’s temporary OMOs. Repurchase agreements are transactions in
which securities are purchased from a primary dealer under an agreement to sell
them back to the dealer on a specified date in the future. The difference between
the purchase price and the repurchase price reflects an interest payment. The
Federal Reserve may enter into repurchase agreements for up to 65 business days,
but the typical maturity is between one and 14 days. Federal Reserve repurchase
agreements supply reserve balances to the banking system for the length of the
agreement. The Federal Reserve employs a naming convention for these transac-
tions based on the perspective of the primary dealers: the dealers receive cash while
the Federal Reserve receives the collateral.”326 In an effort to mitigate problems in
certain Repo markets, on September 14, 2008, the Federal Reserve Board an-
nounced that it would provide a “temporary exception to the limitations in section
23A of the Federal Reserve Act” (which limits a bank’s credit exposure to its affili-
ates).327 This exception “allows all insured depository institutions to provide liquid-
ity to their affiliates for assets typically funded in the tri-party repo market.”328
Commercial Paper Funding Facility (“CPFF”) — Total Potential Support:

$1.8 Trillion
The Commercial Paper Funding Facility (“CPFF”) was created in October 2008
to provide an emergency source of funds (in the Federal Reserve’s terms, a “liquid-
ity backstop”)329 to U.S. corporations that borrow short-term funds by issuing
Commercial Paper (“CP”). CP is a short-term debt security used by corporations
to raise funds in what has historically been a liquid market. This market ceased to
function well in the fall of 2008, and the CPFF has played a role in assuring issuers
and investors in CP that they have a “buyer of last resort.” The CPFF, according
to the Federal Reserve Board’s February 24, 2009, Monetary Report to Congress,
“is intended to improve liquidity in short-term funding markets and thereby
increase the availability of credit for businesses and households.”330 Under CPFF,
the Federal Reserve Bank of New York (“FRBNY”) is committed to lending funds
as needed to a special purpose vehicle (“SPV”) that buys eligible CP from eligible
issuers. Eligible CP is U.S.-dollar-denominated CP or asset-backed CP rated at
least A-1/P-1/F1 (these are the top ratings of the different rating agencies). Eligible
issuers are U.S. corporations, including those with a foreign parent company. For
any given issuer, the SPV is limited to the maximum amount of CP that issuer had
outstanding between January 1 and August 31, 2008. Issuers must pay a fee to
FRBNY of 0.1% of the maximum amount of its CP the SPV could own. The CPFF
is scheduled to expire on February 1, 2010.331
Money Market Investor Funding Facility (“MMIFF”) — Total Potential Support:

$600 Billion
Money market funds are large investment funds that buy high-quality, short-term
debt instruments such as Treasury securities and high-quality bank and corporate
notes. Investors in money market funds want absolute safety for their principal and
fast access to funds. In turn, banks and other financial intermediaries depend on
the money market as a source of funds for their business and household customers.
In 2008, this market experienced the same liquidity problems as other markets —
that is, investors could not find buyers for securities they were seeking to sell when
needed.
To meet this liquidity need, the Federal Reserve created the Money Market
Investor Funding Facility (“MMIFF”) on October 21, 2008. According to the
Federal Reserve Board’s Monetary Report to Congress, “the Federal Reserve Bank
of New York will provide senior secured funding to a series of SPVs to facilitate an
industry-supported private-sector initiative to finance the purchase of eligible assets
from eligible investors. Eligible assets include U.S. dollar-denominated certificates
of deposit and commercial paper issued by highly rated financial institutions and
having remaining maturities of 90 days or less.”332 The SPVs for the MMIFF are
similar to the SPV for CPFF in that they purchase eligible money market paper
using funds from MMIFF and asset-backed CP. FRBNY is committed to lending the
SPVs 90% of the purchase price of eligible assets; sellers of assets to the SPV will
receive that much in cash and the remaining 10% in asset-backed securities from the
SPV.333 The MMIFF has not yet funded any purchases of money market instruments.
Even without having advanced funds to the market, the program may be considered
by the market to be working merely by its existence; investors are given the comfort
that if they need it, it is available. The MMIFF SPVs are authorized through
October 30, 2009.334
Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility

(“AMLF”) — Total Potential Support: At Least $145.9 Billion
The Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility
(“AMLF”) is designed to assist money market funds that hold asset-backed commer-
cial paper (“ABCP”). Through the facility, the Federal Reserve provides non-recourse
loans at the primary credit rate to U.S. depository institutions and bank holding
companies to finance their purchases of high-quality ABCP from money market
mutual funds. According to the Federal Reserve, AMLF is intended “to assist money
funds that hold such paper in meeting demands for redemptions by investors and
to foster liquidity in the ABCP markets and broader money markets.”335 The AMLF
was initially authorized on September 19, 2008, and although originally scheduled to
terminate in January 2009, has been subsequently extended by the Federal Reserve
Board to February 1, 2010.336
Term Securities Lending Facility (“TSLF”), and Term Securities Lending Facility
Options Program (“TOP”) — Total Potential Support: $250 Billion
In the securities markets, primary dealers are a group of securities broker-dealers who
specialize in Treasury and Federal agency debt, and who have the right to trade di-
rectly with the Federal Reserve System. They also participate directly in U.S. Treasury
auctions. They are an important conduit for financial interactions between the
Federal Government and the private markets. In early 2008, this dealer system was
under increasing liquidity pressure, which the Federal Reserve addressed on March
11, 2008, with the establishment of a Term Securities Lending Facility (“TSLF”).
According to the Federal Reserve Board’s February, 2009 Monetary Report to
Congress, “Under the TSLF, the Federal Reserve lends up to $200 billion of Treasury
securities to primary dealers for a term of 28 days (rather than overnight, as in the
regular securities lending program); the lending is secured by a pledge of other securi-
ties.”337 The other securities that must be posted as collateral were broadened from
the traditional eligible assets — Treasury and Federal agency securities, and AAA-
rated private-label residential mortgage-backed securities (“RMBS”) — to include all
investment-grade debt securities. TSLF makes securities available in weekly auctions.
The program is scheduled to end on February 1, 2010.338
An extension of the TSLF is the TSLF Options Program (“TOP”), described by

FRBNY as a program intended to “enhance the effectiveness of TSLF by offer-
ing added liquidity over periods of heightened collateral market pressures, such
as quarter-end dates.”339 The program “offers options on a short-term fixed rate
of [TSLF] bond-for-bond loan of general Treasury collateral against a pledge of
eligible collateral.”340 FRBNY’s Open Market Trading Desk will offer a total of
$50 billion in options for each targeted period.341 As of June 25, 2009, the TOP has
been suspended, although the Federal Reserve states that it is prepared to resume
TOP auctions “if warranted by evolving market conditions.”342
Expansion of System Open Market Account (“SOMA”) Securities Lending — Total

Potential Support: $32 Billion Increase in Funding
The System Open Market Account (“SOMA”) was started in 1969, and is man-
aged by FRBNY. The account contains dollar-denominated assets purchased in
open market operations,343 and is a “store of liquidity in the event an emergency
need for liquidity arises.”344 Borrowing is permitted “for the purpose of covering an
expected fail to receive on the part of a dealer. In order to prevent lending activity
from affecting reserves, Treasury securities, rather than cash, are posted with the
Federal Reserve as collateral.”345 In response to market pressures, the program was
expanded on September 23, 2008, to raise the current dealer aggregate limit from
$3 billion to $4 billion346 and raised again on October 8, 2008, to $5 billion per
dealer.347
Primary Dealer Credit Facility (“PDCF”) — Total Potential Support: At Least

$148 Billion
The Federal Reserve Board’s February 2009 Monetary Report to Congress states
that “to bolster market liquidity and promote orderly market functioning, on March
16, 2008, the Federal Reserve Board voted unanimously to authorize the Federal
Reserve Bank of New York to create a lending facility — the Primary Dealer Credit
Facility [“PDCF”] — to improve the ability of primary dealers to provide financing
to participants in securitization markets.”348 Loans are made to primary dealers,
against which they must post eligible collateral — the definition of which has been
expanded from all investment-grade securities to now include “all collateral eligible
for pledge in tri-party funding arrangements through the major clearing banks.
The interest rate charged on such credit is the same as the primary credit rate
at the Federal Reserve Bank of New York.”349 The first participants in the PDCF
were Merrill Lynch, Goldman Sachs, and Morgan Stanley; it was later expanded to
include other primary dealers. The program is scheduled to terminate on
February 1, 2010.350
Purchases of Direct Obligations of GSEs — Total Potential Support: $200 Billion

Government-Sponsored Enterprises (“GSEs”) are private corporations created by
Congress to fulfill certain financial policy goals, primarily in the housing finance
markets. The most prominent of these are Fannie Mae, Freddie Mac, and the
FHLBs. As Fannie Mae and Freddie Mac in particular encountered difficulty rais-
ing funds in 2008, their problems affected the housing markets in general, where
these two agencies alone accounted for more than half of all financing.
To promote market functioning, the availability of credit, and support for the
housing and mortgage markets, the Federal Reserve, on September 19, 2008, an-
nounced that it would commence purchasing debt and other instruments of the
GSEs though its Open Market Trading Desk; these purchases are made in com-
petitive auctions through primary dealers.
On November 25, 2008, the Federal Reserve announced a program to purchase
up to $100 billion in the GSEs’ direct obligations. Note that GSEs raise funds for
mortgage lending in two ways — by direct borrowing or by guaranteeing third-party
mortgage-backed securities (“MBS”). On March 18, 2009, the Federal Reserve’s
FOMC increased the size of these lines to a total of $200 billion for direct
obligations.351Although the direct borrowing line has been focused on fixed-rate,
non-callable, senior benchmark securities of the GSEs, the Federal Reserve has
stated that it may change the scope of its purchases in the future.
Purchases of GSE-Guaranteed MBS — Total Potential Support: $1.25 Trillion

In addition to purchasing the direct obligations of GSEs, the Federal Reserve is
further supporting the mortgage markets by committing to purchase up to
$1.25 trillion of MBS that have been guaranteed by the GSEs. This purchase line
was originally announced on November 25, 2008, with a maximum purchase limit
of $500 billion, but this amount was raised by $750 billion to $1.25 trillion on
March 18, 2009.352
Foreign Central Bank Currency Liquidity Swaps — Total Potential Support:

$755 Billion
On December 12, 2007, the FOMC announced that it had authorized dollar
liquidity swap lines with the European Central Bank and the Swiss National Bank
in order to “provide liquidity in U.S. dollars to overseas markets.”353 Since then, the
program has expanded to include additional central banks.
The Federal Reserve describes the transactions as follows: “These swaps involve
two transactions. When a foreign central bank draws on its swap line with the
Federal Reserve, the foreign central bank sells a specified amount of its currency
to the Federal Reserve in exchange for dollars at the prevailing market exchange
rate. The Federal Reserve holds the foreign currency in an account at the foreign
central bank. The dollars that the Federal Reserve provides are deposited in an
account that the foreign central bank maintains at the Federal Reserve Bank of
New York. At the same time, the Federal Reserve and the foreign central bank enter
into a binding agreement for a second transaction that obligates the foreign central
bank to buy back its currency on a specified future date at the same exchange rate.
The second transaction unwinds the first. At the conclusion of the second transac-
tion, the foreign central bank pays interest, at a market-based rate, to the Federal
Reserve.
“When the foreign central bank lends the dollars it obtained by drawing on
its swap line to institutions in its jurisdiction, the dollars are transferred from the
foreign central bank’s account at the Federal Reserve to the account of the bank
that the borrowing institution uses to clear its dollar transactions. The foreign cen-
tral bank remains obligated to return the dollars to the Federal Reserve under the
terms of the agreement, and the Federal Reserve is not a counterparty to the loan
extended by the foreign central bank. The foreign central bank bears the credit risk
associated with the loans it makes to institutions in its jurisdiction.”354
Treasuries Purchase Program (“TPP”) — Total Potential Support: $300 Billion

On March 18, 2009, the FOMC announced that “to help improve conditions in
private credit markets, the [FOMC] Committee decided to purchase up to $300
billion of longer-term Treasury Securities over the next six months.”355 The Federal
Reserve states that the goal of TPP is “to provide support to mortgage and hous-
ing markets and to foster improved conditions in financial markets more generally”
by cheapening the yields of the longer-term Government securities which are the
benchmarks against which the rates of long-term loans, such as mortgages, are
set.356
Credit to American International Group, Inc. — Total Potential Support:

$122.5 Billion
The Federal Reserve Board’s Monetary Report to Congress states that “In early
September, the condition of American International Group, Inc. (“AIG”), a large,
complex financial institution, deteriorated rapidly. In view of the likely systemic
implications and the potential for significant adverse effects on the economy of a
disorderly failure of AIG, on September 16, the Federal Reserve Board, with the
support of Treasury, authorized the Federal Reserve Bank of New York to lend up
to $85 billion to the firm to assist it in meeting its obligations and to facilitate the
orderly sale of some of its businesses. This facility had a 24-month term, with inter-
est accruing on the outstanding balance at a rate of 3-month Libor plus 850 basis
points, and was collateralized by all of the assets of AIG and its primary non-regu-
lated subsidiaries. On October 8, the Federal Reserve announced an additional pro-
gram under which it would lend up to $37.8 billion to finance investment-grade,
fixed-income securities held by AIG. These securities had previously been lent by
AIG’s insurance company subsidiaries to third parties.”357 This facility was repaid
in full and terminated on December 12, 2008.358 Subsequently, in November 2008,
“Treasury, through TARP, purchased $40 billion of newly issued AIG preferred
shares under the Systemically Significant Failing Institutions (“SSFI”) program.
The $40 billion took some of the pressure off the first Federal Reserve line of
credit, allowing the Federal Reserve to reduce from $85 billion to $60 billion the
total amount available under the credit facility.”359 In addition to reducing the size
of the line of credit, the Federal Reserve reduced the interest rate on the facility
and extended the term of the facility from two years to five years.360 On
March 2, 2009, the Federal Reserve announced authorization for new loans of up
to an aggregate amount of approximately $8.5 billion to special purpose vehicles
established by domestic life insurance subsidiaries of AIG that would be repaid by
the net cash flows from designated blocks of life insurance policies held by the par-
ent insurance companies.361
Maiden Lane LLC (Bear Stearns) — Total Potential Support: $29.8 Billion
In mid-March of 2008, Bear Stearns, a major investment bank and primary dealer,
was in imminent danger of failure. According to the Federal Reserve Board’s
February 2009 Monetary Report to Congress, “A bankruptcy filing would have
forced the secured creditors and counterparties of Bear Stearns to liquidate un-
derlying collateral, and given the illiquidity of markets, those creditors and coun-
terparties might well have sustained substantial losses. If they had responded to
losses or the unexpected illiquidity of their holdings by pulling back from providing
secured financing to other firms and by dumping large volumes of illiquid assets
on the market, a much broader financial crisis likely would have ensued. Thus,
the Federal Reserve judged that a disorderly failure of Bear Stearns would have
threatened overall financial stability and would most likely have had significant
adverse implications for the U.S. economy.”362 To prevent a complete collapse of
Bear Stearns, therefore, the Federal Reserve invoked its emergency authorities
under Section 13(3) of the Federal Reserve Act to authorize a loan of $30 billion,
secured by $30 billion in Bear Stearns’ assets, to be used by JPMorgan to purchase
Bear Stearns and to assume the company’s financial obligations. A limited liability
company, Maiden Lane LLC was formed to facilitate these arrangements, particu-
larly to hold and manage certain assets. On June 26, 2008, JPMorgan completed
the acquisition. Maiden Lane LLC purchased approximately $30 billion in Bear
Stearns assets on that date with approximately $29 billion of funding from the
Federal Reserve to Maiden Lane LLC and a subordinated loan of approximately $1
billion from JPMorgan.363 Today, the Federal Reserve is managing the disposition of
Bear Stearns’ assets.
Maiden Lane II LLC and Maiden Lane III LLC (American International Group, Inc.)
— Total Potential Support: $22.5 Billion and $30.0 Billion, Respectively
The Federal Reserve Board’s April 2009 Monetary Report to Congress states that
“In November 2008, the Federal Reserve also announced plans to restructure its
lending related to AIG by extending credit to two newly formed limited liability
companies. The first, Maiden Lane II LLC, received a $22.5 billion loan from
the Federal Reserve and a $1 billion subordinated loan from AIG and purchased
residential mortgage-backed securities from AIG. As a result of these actions, the
securities lending facility established on October 8 was subsequently repaid and
terminated. The second new company, Maiden Lane III LLC, received a $30 bil-
lion loan from the Federal Reserve and a $5 billion subordinated loan from AIG
and purchased multi-sector collateralized debt obligations on which AIG ha[d] writ-
ten credit default swap contracts.”364 The Federal Reserve’s first quarterly report on
its credit and liquidity programs shows a decline in fair value on the assets held in
the AIG-related Maiden Lane facilities — a decline in fair value of $2.5 billion and
$6.4 billion, respectively, for Maiden Lanes II and III.365
Bridge Loan to JPMorgan Chase & Bear Stearns — Total Potential Support:
$12.9 Billion
According to the Federal Reserve, on March 14, 2008, FRBNY made an overnight
discount window loan of $12.9 billion to JPMorgan to facilitate its purchase of
Bear Stearns; this was done simultaneously, in a back-to-back transaction, to pro-
vide secured financing to Bear Stearns.366 The loan was repaid in full the following
Monday, March 17, 2008, “with interest of nearly $4 million.” The Federal Reserve
Board describes this decision to extend credit as “designed to provide funding to
Bear Stearns to meet its immediate liquidity needs for that day and to give the com-
pany and policymakers additional time to develop a more permanent solution to
the company’s severe liquidity pressures that threatened to cause its sudden default
and bankruptcy.”367
Federal Deposit Insurance Corporation

FDIC supports banks by insuring depositors against loss. Once depositors need not
worry about the financial health of any particular bank, the entire banking system
can avoid the destabilizing and dangerous potential for “runs on the bank” or other
precipitous withdrawals of funds. Historically a standby guarantor of deposits, the
current banking crisis has drawn FDIC into the business of direct guarantees of
debt instruments, investment funds, and asset values — businesses increasingly
distant from its core. Table 3.6 provides a summary of the key FDIC initiatives
related to the financial crisis. As with the Federal Reserve, any of FDIC’s TARP-
related programs such as its involvement in PPIP and the Asset Guarantee Program
(“AGP”), are omitted from this discussion because they are already mentioned in
Section 2: “TARP Overview” of this report.
Enhanced FDIC Deposit Insurance — Total Potential Support: $700 Billion

Since the 1980s, FDIC has insured deposits up to a maximum of $100,000 per
depositor. In late 2008, in response to the liquidity crisis and uncertain solvency
in the banking industry, FDIC received statutory authority to increase its coverage
to $250,000 for individual accounts.368 FDIC states, “If a depositor’s accounts at
one FDIC-insured bank or savings association total $250,000 or less, the deposits
are fully insured. A depositor can have more than $250,000 at one insured bank
or savings association and still be fully insured provided the accounts meet certain
requirements.”369 According to FDIC, “the standard insurance amount of $250,000
per depositor is in effect through December 31, 2013. On January 1, 2014, the
standard insurance amount will return to $100,000 per depositor for all account
TABLE 3.6
NON-TARP GOVERNMENT SUPPORT OF THE FINANCIAL SECTOR

FEDERAL DEPOSIT INSURANCE CORPORATION ($ BILLIONS)
Total
Potential
Maximum Support
Current Balance Related to
Program Coverage Balance 6/30/2009 Crisis*
Enhanced Deposit Insurance
Depositors $— $— $700.0b
(to $250K/account)a
Temporary Liquidity Guarantee
Program - Debt Guarantees Banks 345.8 345.8c 940.0d
(“TLGP - DGP”)
Temporary Liquidity Guarantee
Program - Transaction Account Depositors 0.4 0.4e 684.0f
Guarantee Program (“TLGP - TAG”)
Total $346.2 $346.2 $2,324.0

* Total Potential Support does not account for any collateral pledged.
a
As of 3/31/2009, the Deposit Insurance Fund (DIF) remained solvent and FDIC had yet to draw on any of the additional borrowing
authority granted by Congress. FDIC, Chief Financial Officer’s Report to the Board, First Quarter 2009, www.fdic.gov/about/strate-
gic/corporate/cfo_report_1stqtr_09/exec_summary.html, accessed 7/10/2009.
b
Estimate as of 12/31/2008. Congressional Budget Office, “The Budget and Economic Outlook: Fiscal Years 2009-2019, p. 41.
c
Federal Deposit Insurance Corporation, Monthly Reports on Debt Issuance Under the Temporary Liquidity Guarantee Program,
5/31/2009, www.fdic.gov/regulations/resources/tlgp/reports.html, accessed 6/23/2009.
d
FDIC, Chief Financial Officer’s Report to the Board, Q4 2008, www.fdic.gov/about/strategic/corporate/cfo_report_4qtr_08/
sum_trends_results.html, accessed 6/30/2009.
e
As of 3/31/2009, during 2008 FDIC paid out $70 million in guaranteed claims of depositors. FDIC, Chief Financial Officer’s
Report to the Board, Q4 2008, www.fdic.gov/about/strategic/corporate/cfo_report_4qtr_08/sum_trends_results.html, accessed
6/30/2009. During Q1 2009, FDIC paid out $323 million, www.fdic.gov/about/strategic/corporate/cfo_report_1stqtr_09/corp_
fund_fin_statement.html, accessed 6/30/2009.
f
FDIC, Supervisory Insights, Summer 2009, p. 4, FDIC, Supervisory Insights, Summer 2009, p. 4, www.fdic.gov/regulations/
examinations/supervisory/insights/sisum09/si_sum09.pdf, accessed 7/9/2009.
categories except IRAs and other certain retirement accounts, which will remain at
$250,000 per depositor.”370
The Congressional Budget Office (“CBO”), in its “Budget and Economic
Outlook: Fiscal Years 2009 to 2019,” estimates that the temporary increase in the
limit of deposit insurance will “increase the amount of insured deposits by about
$700 billion, or 15 percent.”371 Claims on deposit insurance are paid by the Deposit
Insurance Fund (“DIF”), which is financed by fees levied on insured banks. In the
event that the funds available in the DIF should be insufficient to cover claims,
FDIC can borrow from Treasury (historically up to $30 billion, but recently in-
creased to $100 billion with a temporary authority up to $500 billion).372 As of the
end of March, 2009, FDIC had not borrowed from Treasury to cover any losses to
DIF.373
Temporary Liquidity Guarantee Program (Debt Guarantee Program) — Total

Potential Support: $940 Billion
The Temporary Liquidity Guarantee Program (“TLGP”) was established in October
2008 to address “disruptions in the credit market, particularly the interbank lend-
ing market, which reduced banks’ liquidity and impaired their ability to lend. The
goal of the TLGP is to decrease the cost of bank funding so that bank lending to
consumers and businesses will normalize.”374 The program “does not rely on the
taxpayer or the deposit insurance fund to achieve its goals;”375 rather, it is “entirely
funded by industry fees.”376 TLGP has two components, the debt guarantee pro-
gram (“DGP”) discussed in this paragraph and the Transaction Account Guarantee
(“TAG”) program described in the following paragraph. DGP provides an FDIC
guarantee of newly issued senior unsecured debt of depository institutions. The
goal of the DGP is to “create significant investor demand, and dramatically reduce
funding costs for eligible banks and bank holding companies.”377 FDIC-insured
institutions were automatically included in the program, but given the option not to
participate. Participating institutions may issue debt under the DGP until October
31, 2009, with the debt being guaranteed until “the earliest of the opt-out date,
the maturity of the debt, the mandatory conversion date for mandatory convertible
debt, or December 31, 2012.”378
Temporary Liquidity Guarantee Program (Transaction Account Guarantee

Program) — Total Potential Support: $684 Billion
On October 14, 2008, FDIC announced the temporary Transaction Account
Guarantee (“TAG”) program, which is the second component of the TLGP. It
provides depositors with “unlimited coverage for non-interest-bearing transac-
tion accounts if their bank is a participant in FDIC’s TLGP. Non-interest-bearing
checking accounts include Demand Deposit Accounts (“DDAs”) and any transac-
tion account that has unlimited withdrawals and that cannot earn interest. Also
included are low-interest NOW [“Negotiable Order of Withdrawal”] accounts

that cannot earn more than 0.5% interest.”379 The program is scheduled to end on
December 31, 2009. On June 23, 2009, FDIC voted to seek comment on whether
to extend the TAG until June 30, 2010.380 As with the debt guarantee component,
FDIC-insured institutions were given the option not to participate in the TAG
program.
U.S. Department of the Treasury

Outside of TARP, Treasury is using its non-EESA resources and authorities to sup-
port a number of other programs for the benefit of the financial industry. EESA,
the legislation that created TARP, was not the first financial rescue act of Congress
in 2008. Prior to EESA, Congress passed the Housing and Economic Recovery
Act of 2008 (“HERA”) in July 2008. As such, many of Treasury’s earlier efforts at
restoring stability to the financial sector arose out of provisions in this law. Table
3.7 provides a summary of the key Treasury initiatives related to the financial crisis.
TABLE 3.7
NON-TARP GOVERNMENT SUPPORT OF THE FINANCIAL SECTOR — U.S. TREASURY ($ BILLIONS)

Maximum Total Potential
Current Balance as of Support Related
Program Coverage Balance 6/30/2009 to Crisis*
Money Market Mutual Fund (“MMMF”)
Money Market Mutual Funds $— $— $3,355.3a
Program
GSE Preferred Stock Purchase
Fannie/Freddie; Housing Markets 59.8 59.8b 400.0c
Agreements (“PSPA”)
GSE MBS Purchase Program Fannie/Freddie; Housing Markets 145.7 145.7d 314.0e
GSE Credit Facility Program Fannie/Freddie; Housing Markets — — 25.0f
Other HERA/Treasury
Homeowners, Communities 19.0 19.0 19.0g
(Tax Benefits and CDBG)
Student Loan Purchases, and Asset-
Higher Education 32.6 32.6h 195.0i
Backed Commercial Paper Conduitsc
Potential International Fund Liabilities International Agencies — — 100.0j
Total $257.1 $257.1 $4,408.3

*Total potential support does not account for any collateral pledged.
a
Per Treasury, the MMMF provided coverage to all participating money market mutual funds as of 9/19/2008. Treasury Press Release, “Treasury Announces Extension of Temporary
Guarantee Program for Money Market Funds,” 3/31/2009, www.ustreas.gov/press/releases/tg76.htm, accessed 6/24/2009. The amount, $3.355 trillion, represents the total money
market mutual funds outstanding at the end of Q3, 2008. Federal Reserve Board Statistical Release Z.1, Flow of Funds Accounts of the United States, 6/11/2009, Table L.206.
b
Data as of 4/16/2009. White House, FY 2010 Budget, www.whitehouse.gov/omb/budget/fy2010/assets/gov.pdf, accessed 6/25/2009.
c
Data as of 4/16/2009. White House, FY 2010 Budget, www.whitehouse.gov/omb/budget/fy2010/assets/gov.pdf, accessed 6/25/2009.
d
Treasury, Monthly Treasury Statement, May 2009, www.fms.treas.gov/mts/mts0509.pdf, accessed 6/25/2009.
e
Treasury, “Budget in Brief FY 2010,” www.ustreas.gov/offices/management/budget/budgetinbrief/fy2010/BIB-HousingGSE.pdf, accessed 6/25/2009; represents the sum of Trea-
sury’s estimates for FY 2008, FY 2009, and FY 2010.
f
House Financial Services Committee, Summary of Key Provisions in HR 3221, Housing and Economic Recovery Act of 2008, www.financialservices.house.gov/FHA.html, accessed
6/25/2009.
g
House Financial Services Committee, Summary of Key Provisions in HR 3221, Housing and Economic Recovery Act of 2008, www.financialservices.house.gov/FHA.html, accessed
6/25/2009.
h
As of May 31, 2009. Treasury, Monthly Treasury Statement, May 2009, www.fms.treas.gov/mts/mts0509.pdf, accessed 7/2/2009.
I
Federal Register, “Vol. 74, No. 10, 1/15/2009, Notices; Department of Education Federal Family Education Loan Program,” http://federalstudentaid.ed.gov/ffelp/library/EA43FedReg.
pdf, accessed 6/28/2009.
j
Treasury, “Fact Sheet: IMF Reforms and New Arrangements to Borrow,” 5/18/2009, www.treas.gov/press/releases/tg136.htm, accessed 6/25/2009.
Money Market Mutual Fund (“MMMF”) Program — Total Potential Support:

$3.4 Trillion
Treasury initiated the temporary Money Market Mutual Fund (“MMMF”) guaran-
tee program on September 29, 2008. The stated intent was to address temporary
dislocations in credit markets by guaranteeing “the share price of any publicly
offered eligible money market mutual fund — both retail and institutional — that
applies for and pays a fee to participate in the program.”381 According to Treasury,
the program provided “coverage to shareholders for amounts that they held in par-
ticipating money market funds as of the close of business on September 19, 2008.
The guarantee will be triggered if a participating fund’s net asset value falls below
$0.995, commonly referred to as breaking the buck.”382
Originally designed to last for three months, the program has been renewed and
extended by the Treasury Secretary to run until the close of business on September
18, 2009.383 Funding for the program was drawn not from TARP funds, but from
the Exchange Stabilization Fund, which was established by the Gold Reserve Act of
1934.384 The Exchange Stabilization Fund has assets of approximately $50 million,
and the total exposure of the MMMF program is theoretically approximately $3.4
trillion — the total amount of money market mutual funds outstanding as of the
third quarter of 2008, when the program was created.385
GSE Preferred Stock Purchase Agreements (“PSPA”) — Total Potential Support:

$400 Billion
HERA provided temporary authority for Treasury to purchase obligations of the
housing GSEs. In September 2008 FHFA, established under HERA to oversee
the housing GSEs, put Fannie Mae under Federal conservatorship, and Treasury
entered into a Preferred Stock Purchase Agreement (“PSPA”) with Fannie Mae
to make investments of up to $100 billion in senior preferred stock as required to
maintain positive equity.386 According to the White House’s FY 2010 budget docu-
ment, “On February 18, 2009, Treasury announced that the funding commitments
for the PSPA would be increased to $200 billion. As of April 16, 2009, Fannie Mae
has received $15.2 billion under the PSPA.”387 Similarly, in September 2008, FHFA
put Freddie Mac under Federal conservatorship and Treasury entered into a PSPA
with Freddie Mac to make investments of up to $100 billion in senior preferred
stock as required to maintain positive equity. On February 18, 2009, Treasury
announced that the funding commitments for the Freddie Mac PSPA would be
increased to $200 billion, the same as Fannie Mae’s commitment. As of April 16,
2009, Freddie Mac has received $44.6 billion under the PSPA.388According to
Treasury’s FY 2010 budget, “the function of the PSPAs is to instill confidence in
investors that Fannie Mae and Freddie Mac will remain viable entities critical to
the functioning of the housing and mortgage markets.”389
GSE MBS Purchase Program — Total Potential Support: $314 Billion

HERA also gave Treasury the authority to purchase GSE MBS in the open mar-
ket, and Treasury announced the program on September 7, 2008.390 According to
Treasury’s FY 2010 budget, “The function of the GSE MBS Purchase Program is to
help improve the availability of mortgage credit to American homebuyers and miti-
gate pressures on mortgage rates. To promote the stability of the mortgage market,
Treasury has purchased GSE MBS in the secondary market. By purchasing these
guaranteed securities, Treasury sought to broaden access to mortgage funding for
current and prospective homeowners as well as to promote market stability.”391
GSE Credit Facility Program — Total Potential Support: $25 Billion

The third Treasury program conducted under HERA relating to the GSEs is a
program designed to “ensure credit availability to the housing GSEs by providing
secured funding on an as-needed basis.”392 All of the GSEs (Fannie Mae, Freddie
Mac, and the FHLBs) would be able to borrow under the program if needed until
December 31, 2009. Treasury’s FY 2010 budget describes the program as one of
short-term loans — less than one month but greater than one week — collateral-
ized by MBS issued by Fannie Mae and Freddie Mac and advances made by the
FHLBs; no loan can have a maturity date later than December 31, 2009.393
Other HERA 2008 Programs — Total Potential Support: $19 Billion

HERA focused on the early centers of the financial crisis — the home mortgage
markets and the housing-related GSEs. Beyond the GSE programs, the other
components pertaining to Treasury include measures to support home prices in
general, and to support families and communities harmed by the mortgage market
problems. Specifically, the act introduced $15 billion in homebuyer tax credits,
extension of the property tax deduction to non-itemizing filers, as well as $4 billion
in emergency assistance for neighborhood real estate market stabilization.394
Joint Treasury/Department of Education Student Loan Programs —

Total Potential Support: $195 Billion
Treasury and the Department of Education have jointly announced four pro-
grams to support the student loan markets, which have been affected by the
credit crisis. The authority for these new programs is addressed in the Ensuring
Continued Access to Student Loans Act of 2008. The first of these programs is
the Participation Program, under which the Government will buy participations
in pools of student loans. The second is the Purchase Program, through which
the Government will purchase individual loans from lenders so that the lender’s
balance sheets can be freed up to make new student loans. The third is the Short
Term Purchase Program (“STPP”), which is a time extension of the Purchase
Program. The fourth new program is the Asset-Backed Conduit Program (“ABCP”),
under which the Government will issue forward commitments to purchase Federal
Family Educational Loan Program (“FFELP”) loans from qualified ABS issuers.395
Commitments to International Fund — Total Potential Support: $100 Billion

On April 2, 2009, President Obama secured an agreement to increase the
International Monetary Fund (“IMF”) New Arrangements to Borrow (“NAB”)
by up to $500 billion, of which the United States committed up to $100 billion.
According to Treasury, “expanding the NAB will ensure the IMF has adequate
resources to play its central role in resolving and preventing the spread of interna-
tional economic and financial crises. Large and urgent financing needs projected
for emerging markets and developing countries cannot be met from pre-crisis IMF
lending resources.”396
Other Federal Agencies Supporting Financial Markets

In addition to the Federal Reserve, Treasury, and FDIC, the Federal Government
operates a number of financial agencies, many of which are running their own
financial rescue programs as outlined in Table 3.8.
Federal Home Finance Agency (“FHFA”) — Fannie Mae and Freddie Mac —
Total Potential Support: $5.5 Trillion
FHFA was created on July 30, 2008, as part of HERA. The agency is an indepen-
dent regulator of certain housing-related GSEs.397 These institutions are Fannie
Mae, Freddie Mac, and the FHLBs. The financial markets have historically viewed
the GSEs as quasi-governmental, and awarded them high ratings and low borrow-
ing costs in the anticipation that the U.S. Government would bail them out if they
were ever in trouble.
In August and September of 2008, Fannie and Freddie lost market confidence
as their losses grew and their financial situations became uncertain, and both had
difficulty raising funds. Instead of shutting down the companies, FHFA brought
them into Federal conservatorship and worked with Treasury and the Federal
Reserve to institute the various purchase and credit programs mentioned above.
By bailing out Fannie Mae and Freddie Mac, FHFA has reinforced the market’s
assumptions that the obligations of the GSEs are implied liabilities of the U.S.
Government.398 Outstanding debt obligations and MBS guarantees of those two
firms alone exceed $5.5 trillion.399
FHFA — Federal Home Loan Banks (“FHLBs”) — Total Potential Support:

$1.3 Trillion
The Federal Home Loan Banks (“FHLBs”) are a system of 12 regional banks from
which local lending institutions borrow funds to finance housing and other lending.
The FHLBs are organized as member-owned cooperatives, focused on providing
TABLE 3.8
NON-TARP GOVERNMENT SUPPORT OF THE FINANCIAL SECTOR

OTHER FEDERAL HOUSING AND FINANCIAL SYSTEM SUPPORT ($ BILLIONS)
Total
Potential
Maximum Support
Current Balance as of Related to
Agency / Program Coverage Balance 6/30/2009 Crisis*
FHFA —
Fannie Mae and
Fannie Mae / Freddie $— $— $5,500.0b
Freddie Mac
Mac Conservatorshipa
FHFA — Implied Guarantee Federal Home
— — 1,300.0b
of FHLB liabilitiesa Loan Banks
National Credit Union Administration
(“NCUA”)
Temporary Corporate Credit Union Credit Unions 15.2 15.2d 15.2
Liquidity Guarantee Program
(“TCCULGP”)c
NCUA Homeowners Affordability
Relief Program (“HARP”) and Credit
Credit Unions 8.4 8.4e 41.0f
Union System Investment Program
(“CU SIP”)
Increase in Guarantees by Govern-
Mortgage
ment National Mortgage Assoc. 149.2 149.2 149.2h
Lenders
(“GNMA”)g
Increase in Guarantees by Federal Mortgage
134.5 134.5 134.5i
Housing Authority (“FHA”)g Lenders
Increase in Guarantees by Dept. of Mortgage
10.6 10.6 10.6j
Veterans Affairs (“VA”)g Lenders
Total $317.9 $317.9 $7,150.5
*Total potential support does not account for any collateral pledged.
a
These obligations have been viewed as enjoying an “implied” guarantee because of historical U.S. Government involvement and sup-
port. In 2001, the CBO stated: “CBO attributes the greater liquidity of GSE securities over those of other financial firms to the implicit
guarantee, much as the Government guarantee of Treasury securities is often cited as the reason for their liquidity.” Congressional
Budget Office, “Federal Subsidies and the Housing GSEs, Appendix A: Responses to Analyses of the Congressional Budget Office’s 1996
Subsidy Estimates,” 5/2001, www.cbo.gov/doc.cfm?index=2841&type=0&sequence=7, accessed 7/1/2009.
b
Federal Housing Finance Agency (FHFA), “The Housing GSE’s”, Presentation by James Lockhart, Executive Director, 12/10/2008,
www.fhfa.gov/webfiles/216/WHF121008webversion.pdf, accessed 6/28/2009.
c
Does not include impact of deposit insurance increase to $250,000.
d
NCUA, Preliminary NCUA Financial Highlights, 3/31/2009, www.ncua.gov/Resources/Reports/ncusif/2009/Mar09PRELIMNETREPORT.
pdf, accessed 6/28/2009.
e
NCUA, “Statement of Michael E. Fryzel, Chairman, National Credit Union Administration, on ‘HR 2351, The Credit Union Share Insurance
Stabilization Act,” 5/20/2009, www.house.gov/apps/list/hearing/financialsvcs_dem/fryzel_testimony.pdf, accessed 7/14/2009.
f
Congressional Budget Office, “The Budget and Economic Outlook – Fiscal Years 2009 and 2010,”January 2009.
g
Represents increase in 2008 over 2007.
h
GNMA, Report to Congress, Fiscal Year 2008, 11/7/2008, www.ginniemae.gov/reporttocongress/, accessed 6/28/2009.
i
Federal Housing Administration, “Message from the Chief Financial Officer,” p. 323, 11/17/2008, fhasecure.gov/offices/cfo/reports/
section3.pdf, accessed 6/28/2009.
j
White House, Budget FY 2009 – Department of Veterans Affairs, www.whitehouse.gov/omb/budget/fy2009/veterans.html, accessed
6/28/2009.
low-cost funding for their members. According to the Council of Federal Home
Loan Banks, the FHLBs provide financing to approximately 80% of U.S. lending
institutions.400
It is true that FHFA, and by extension Treasury, do not have full legal liability
for all of Fannie Mae’s and Freddie Mac’s losses, but it has created a very strong
implied guarantee by taking responsibility for the entities and increasing their
participation in the financial markets, instead of closing them. By bailing out
Fannie Mae and Freddie Mac, the FHFA creates an assumption in the market that
it would do the same for the FHLBs. The FHLBs have total liabilities of approxi-
mately $1.3 trillion.401
NCUA — Temporary Corporate Credit Union Liquidity Guarantee Program

(“TCCULGP”) — Total Potential Support: $15.2 Billion
The National Credit Union Administration (“NCUA”) essentially acts as the FDIC
of the nation’s credit unions. The independent agency charters and supervises cred-
it unions, as well as insures their depositors (technically, “shareholders”) against
loss through the National Credit Union Share Insurance Fund (“NCUSIF”).402 As
of March 31, 2009, NCUA insured approximately $612 billion of deposits.403
NCUA has initiated several programs to address financial system difficulties,
in addition to its normal deposit insurance programs. The first is the Temporary
Corporate Credit Union Liquidity Guarantee Program (“TCCULGP”), under
which NCUA insures the senior unsecured debt of member institutions experi-
encing temporary liquidity difficulties.404 On May 21, 2009, the TCCULGP was
extended to June 30, 2010, for new issuances, with the debt being guaranteed until
June 30, 2017. Further, the guaranteed debt limit was revised to “the greater of:
1) 100% of maximum unsecured debt obligations outstanding from September 30,
2007, to September 30, 2008, limited to no more than $10 billion, 2) amount ap-
proved by the Office of Corporate Credit Unions not to exceed the greater of $100
million or 5% of liabilities and shares.”405 As of April 21, 2009, there were
23 corporate credit unions participating in the program.406
NCUA Homeowners Affordability Relief Program (“HARP”) and Credit Union

System Investment Program (“CU SIP”) — Total Potential Support: $41 Billion
The other major financial rescue programs initiated by NCUA were the
Homeowners Affordability Relief Program (“HARP”)407 and the Credit Union
System Investment Program (“CU SIP”).408 These programs intend to help mem-
bers avoid delinquency and default (HARP) and increase the liquidity in the credit
union system (CU SIP).
Government National Mortgage Association (“GNMA”) — Total Potential Support:

$149.2 Billion
GNMA guarantees investors the timely payment of principal and interest on MBS
backed by Federally insured or guaranteed loans, thus helping to provide liquid-
ity to the housing markets. The largest housing agency that supplies mortgages
to GNMA-backed MBS is the Federal Housing Administration (“FHA”). Other
Federal mortgage programs participating in GNMA’s programs include those of the
Veteran’s Administration.409 The guarantees are thus redundant, in the sense that
another Federal program is already insuring much of the principal amount, but
the ultimate potential losses to the Federal Government depend on the particulars
of the individual losses. Outstanding single-family guarantees in September 2008
were $537.3 billion, and outstanding multi-family guarantees were $39.4 billion.
Collectively, those amounts were up $149.2 billion in 2008 as the private financial
sector lost its ability to absorb them.410
Federal Housing Administration (“FHA”) — Total Potential Support: $134.5 Billion

FHA provides home mortgage insurance to lenders; if the borrower should fail to
make payments and goes into foreclosure, FHA will insure the lender against most
of its losses. FHA is the oldest of the Federal housing agencies. In 2008, it had
outstanding liabilities of more than $576.4 billion in single-family and multi-family
mortgage programs, an increase of $134.5 billion from the previous year.411
Department of Veterans Affairs (“VA”) Home Loan Guarantee Program —

Total Potential Support: $10.6 Billion
The Department of Veterans Affairs (“VA”) runs a mortgage guarantee program
similar to FHA’s, but limited to veterans of the U.S. military. VA’s programs pro-
vide 100% financing (that is, there is no down payment required).412 There were
estimated to be nearly $35 billion in VA loans outstanding in 2008, an increase of
nearly $11 billion (44%) over the previous year.413
TARP OPERATIONS AND
S ECT ION 4
ADMINISTRATION
Under the Emergency Economic Stabilization Act of 2008 (“EESA”), Congress

authorized the Treasury Secretary to take such actions as necessary to build
the operational and administrative infrastructure to support the Troubled Asset
Relief Program (“TARP”) activities. EESA authorized the establishment of an
Office of Financial Stability (“OFS”) within the U.S. Department of the Treasury
(“Treasury”) to be responsible for the administration of TARP. 414 Treasury has the
authority to establish program vehicles, issue regulations, directly hire or appoint
employees, enter into contracts, and designate financial institutions as financial
agents of the Federal Government.415 In addition to using permanent and interim
staff, OFS relies on contractors and financial agents in legal, investment consult-
ing, accounting, and other key service areas.416
TARP ADMINISTRATIVE AND PROGRAM

EXPENDITURES
Treasury stated that it had incurred $27.5 million in TARP-related administrative
expenditures through June 30, 2009.417 Table 4.1 summarizes these expenditures,
as well as additional obligations through June 30, 2009. The majority of these costs
are allocated to Personnel Services and Non-Personnel Other Services.
TABLE 4.1
TARP ADMINISTRATIVE EXPENDITURES AND OBLIGATIONS ($MILLIONS)

Obligations for Period Expenditures for Period
Budget Object Class Title Ending 6/30/2009 Ending 6/30/2009
Personnel Services
Personnel Compensation & Services $7,897,655 $7,186,531
Total Personnel Services $7,897,655 $7,186,531
Non-Personnel Services
Travel & Transportation of Persons $107,630 $75,975
Transportation of Things 24,105 105
Rents, Communications, Utilities & Misc.
80,659 30,435
Charges
Printing & Reproduction 395 395
Other Services 54,516,949 19,953,191
Supplies & Materials 81,783 81,783
Equipment 222,966 217,857
Land & Structures — —
Total Non-Personnel Services $55,034,487 $20,359,741
Grand Total $62,932,142 $27,546,272
Note: Numbers affected by rounding.

Additionally, Treasury has released details of programmatic expenditures. These

expenditures include costs to hire financial agents and legal firms associated with
TARP operations. Treasury shows the allocation of these programmatic costs at
$64 million as of June 30, 2009.418
TARP operations are projected to cost approximately $175 million for fis-
cal year 2009.419 These costs are not reflected in determining any gains or losses
on the TARP-related transactions and are not included in the $699 billion limit
on asset purchases. Therefore, these expenditures will add to the Federal budget
deficit regardless of whether the TARP transactions result in a gain or a loss for the
Government.420
CURRENT CONTRACTORS AND FINANCIAL

AGENTS
As of June 30, 2009, Treasury had retained 45 outside contractors, including 4
asset managers, to provide a range of services to assist in administering TARP. As
permitted in EESA, Treasury has used streamlined solicitation procedures and has
structured several agreements and contracts to allow for flexibility in obtaining
the required services expeditiously. Table 4.2 lists outside vendors as of June 30,
2009.421
As required by EESA, SIGTARP must report the biographical information for
each person or entity hired to manage the troubled assets associated with TARP.422
Since the publication of SIGTARP’s April Quarterly Report, there have been four
important staff- or contractor- related developments at OFS:
• confirmation of a new Assistant Secretary of the Treasury for Financial Stability

• appointment of a Special Master for TARP Executive Compensation
• creation of a Treasury position for restructuring/exit strategy
• appointment of three asset managers
Assistant Secretary
On June 19, 2009, Herbert Allison was confirmed by the U.S. Senate to be the
Assistant Secretary of the Treasury for Financial Stability, replacing Neel Kashkari,
who served on an interim basis.423 In this role, Mr. Allison is responsible for “de-
veloping and coordinating Treasury’s policies on legislative and regulatory issues
affecting financial stability, including overseeing the Troubled Asset Relief Program
(TARP).”424 He will also have the title of Counselor to the Secretary.
Special Master for TARP Executive Compensation

On June 10, 2009, the President announced plans to appoint Kenneth Feinberg as
the Special Master for TARP Executive Compensation, to “ensure compensation
TABLE 4.2
OUTSIDE VENDORS
Date Vendor Purpose Type of Transaction*
10/10/2008 Simpson, Thacher & Bartlett Legal Services BPA
10/11/2008 EnnisKnupp Investment and Advisory Services BPA
10/14/2008 Bank of New York Mellon Custodian and Cash Management Financial Agent
10/16/2008 PricewaterhouseCoopers Internal Control Services BPA
10/18/2008 Ernst & Young Accounting Services BPA
10/23/2008 GSA – Turner Consulting** Archiving Services IAA
10/29/2008 Hughes Hubbard & Reed Legal Services BPA
10/29/2008 Squire Sanders & Dempsey Legal Services BPA
10/31/2008 Lindholm & Associates** Human Resources Services Contract
11/7/2008 Thacher Proffitt & Wood*** Legal Services BPA
11/14/2008 Securities and Exchange Commission Detailees IAA
11/14/2008 CSC Systems and Solutions IT Services Procurement
12/3/2008 Trade and Tax Bureau – Treasury IT Services IAA
12/5/2008 Department of Housing and Urban Development Detailees IAA
12/5/2008 Washington Post Vacancy Announcement Procurement
12/10/2008 Thacher Proffitt & Wood*** Legal Services BPA
12/12/2008 Pension Benefit Guaranty Corporation Legal Services IAA
12/15/2008 Office of Thrift Supervision Detailees IAA
12/24/2008 Cushman and Wakefield of VA, Inc. Painting Procurement
1/6/2009 Office of the Comptroller of the Currency Detailees IAA
1/7/2009 Colonial Parking Parking Procurement
1/9/2009 Internal Revenue Service Detailees IAA
1/27/2009 Cadwalader Wickersham & Taft, LLP Legal Services BPA
1/27/2009 Whitaker Brothers Bus. Machines Office Machines Procurement
2/2/2009 Government Accountability Office Oversight IAA
2/9/2009 Pat Taylor and Associates, Inc.** Temporary Employee Services Contract
2/12/2009 Locke Lord Bissell & Lidell LLP Legal Services Contract
2/18/2009 Freddie Mac Homeownership Program Financial Agent
2/18/2009 Fannie Mae Homeownership Program Financial Agent
2/20/2009 Congressional Oversight Panel Oversight IAA
2/20/2009 Simpson, Thacher & Bartlett Legal Services Contract
2/22/2009 Venable LLP Legal Services Contract
3/6/2009 Boston Consulting Group Management Consulting Support Contract
3/16/2009 EARNEST Partners Asset Management Services Financial Agent
3/23/2009 Heery International Inc. Architects Procurement
3/30/2009 McKee Nelson, LLP Legal Services Contract
3/30/2009 Sonnenschein Nath & Rosenthal Legal Services Contract
3/30/2009 Cadwalader Wickersham & Taft, LLP Legal Services Contract
3/30/2009 Haynes and Boone LLP Legal Services Contract
3/31/2009 FI Consulting** Modeling and Analysis BPA
OUTSIDE VENDORS (CONTINUED)

Date Vendor Purpose Type of Transaction*
4/3/2009 American Furniture Rentals** Office Furniture Procurement
4/17/2009 Herman Miller Office Furniture Procurement
4/17/2009 Bureau of Printing and Engraving Detailee IAA
4/21/2009 AllianceBernstein Asset Management Services Financial Agent
4/21/2009 FSI Group Asset Management Services Financial Agent
4/21/2009 Piedmont Investment Advisors Asset Management Services Financial Agent
5/14/2009 Phacil Inc.** FOIA Services Contract
5/26/2009 Anderson, McCoy & Orta, LLP** Legal Services Contract
5/26/2009 Simpson, Thacher & Bartlett Legal Services Contract
6/8/2009 Department of Interior IT Services IAA
6/29/2009 Department of Interior Website Testing IAA
Notes:
*IAA = Inter-Agency Agreement, BPA = Blanket Purchase Agreement.
**Small or Women/Minority-Owned Small Business.
***Contract responsibilities assumed by Sonnenschein Nath & Rosenthal via novation.
plans are consistent with the public interest.”425 As mentioned previously in

the “Executive Compensation” discussion in Section 2: “TARP Overview,” Mr.
Feinberg, whose mediation experience includes acting as the Special Master of the
September 11th Victim Compensation Fund, “will review payments and compen-
sation plans for the executives and the 100 most highly compensated employees
of TARP recipients that have received exceptional assistance to ensure that com-
pensation is structured in a way that gives those employees incentives to maximize
long-term shareholder value and protect taxpayer interests.”426 Companies receiv-
ing exceptional financial assistance include those receiving assistance under the
Systemically Significant Failing Institutions (“SSFI”), the Targeted Investment
Program (“TIP”), and the Automotive Industry Financing Program (“AIFP”), and
currently include the American International Group (“AIG”), Citigroup, Bank of
America, Chrysler, General Motors (“GM”), GMAC and Chrysler Financial.
Restructuring/Exit Strategy
On May 18, 2009, Treasury announced the hiring of Jim Millstein as its Chief
Restructuring Officer, within OFS. Mr. Millstein, whose restructuring experience
included 28 years of advisory work as a lawyer and as an investment banker, has
taken the lead in managing Treasury’s investment in AIG and other significant
investments and in developing exit strategies for Treasury from these investments
over time.
Asset Managers
On April 22, 2009, Treasury announced the selection of three firms to manage its
portfolio of assets issued by banks and other institutions participating in the Capital
Purchase Program (“CPP”) and other TARP programs. The assets to be managed
include senior preferred shares, senior debt, equity warrants, and other equity and
debt obligations. Following a review of more than 200 submissions from interested
firms, Treasury selected AllianceBernstein L.P., FSI Group, LLC, and Piedmont
Investment Advisors, LLC for agreements valid until April 20, 2014.427 According
to OFS, AllianceBernstein is a leading global investment management firm that
offers “high-quality research and diversified investment services to institutional
clients, individuals and private clients in major markets around the world.”428 The
firm is, headquartered in New York City and employs more than 500 investment
professionals with expertise in growth equities, value equities, fixed-income securi-
ties, blend strategies and alternative investments.429
According to OFS, FSI Group operates a “multi-strategy investment platform
focused on opportunities in the financial services sector.”430 The firm is based in
Cincinnati and specializes in financing and investing in banks, thrifts, insurance
companies, Real Estate Investment Trusts (“REITs”), real estate operating compa-
nies and other financial services firms.
According to OFS, Piedmont Investment Advisors, LLC is a money manage-
ment firm specializing in “core equity and fixed-income management.”431 The firm
was founded in August 2000 and is based in Durham, North Carolina.
Responsibilities
The three asset management firms have each been assigned a representative
cross-section of Treasury holdings, weighted towards the specialty of each firm.
AllianceBernstein has been allocated assets relating to 390 of the 644 financial in-
stitutions in OFS’s portfolio, a broad mix of holdings diversified along institutional
size and geographic lines.432 FSI Group was allocated 184 institutions, weighted
towards small, publicly held, local institutions.433 Piedmont was allocated 70 insti-
tutions, weighted towards the larger institutions, given their specialty in macro-level
analysis.434
The firms will all employ a “buy-and-hold” management approach, focusing on
the policy goal of market stability over the typical asset manager goals of diver-
sification and return on investment.435 The asset managers will conduct analysis
and ongoing valuation of the Treasury holdings in their portfolios on behalf of
Treasury and the taxpayers, and advise Treasury on management of the accounts
and “strategy and optimal timing to execute warrants or monetize preferred shares
and other equity securities or debt obligations, consistent with both the duty to the
taxpayer and the goal of market stability,” as well as strategies relating to corporate
actions (i.e., proxies, disclosures, mergers/acquisitions, de-listings, etc.).436 However,
the managers will not execute any transactions unless specifically instructed by
OFS.437 Should OFS request a trade or transaction, the asset managers will advise
Treasury on its disposition strategy and negotiate with broker/dealers to achieve
results “consistent with best execution at the most favorable prices reasonably
obtainable.”438
Index Fund: Portfolio that tracks an Given their buy-and-hold strategy, OFS intends to compensate the asset manag-
established index, and thus requires ers with fees consistent with an index fund manager. OFS will pay a fee of approxi-
minimal research on the part of the mately 3 basis points (0.03%) of the asset manager’s portfolio per quarter.439
asset manager — typically providing a
lower management fee structure.
Key Deliverables and Compliance Roles
Each of the asset managers will provide several deliverables as well as regular com-
pliance information to OFS, including:440
• monthly valuations of preferred shares and warrants for the financial institu-
tions assigned to the asset manager
• detailed cash flow projections for each security held
• monthly yield and maturity probability matrices
• IT security report
• annual certification
• annual SAS 70
• quarterly disclosure on organizational conflicts of interest
• quarterly disclosure on personal conflicts of interest
• certification of communications with Treasury employees
• quarterly confidentiality certification
• quarterly compliance reports
• quarterly disclosure of revenue-sharing agreements
Conflict Mitigation
Treasury has identified several potential conflicts of interest on the part of the asset
managers, ranging from the potential of TARP institutions being clients of the as-
set manager to the individual fund managers potentially owning shares of stock in
institutions that have received TARP funds, among others, and has adopted mitiga-
tion plans that address these conflicts. Treasury recognizes that its decisions to sell
off portions of its portfolio represent material non-public information that cannot
be shared by the particular individuals working on the Treasury portfolios with
other members of the asset management firm. To address these concerns, Treasury
has required each asset manager to “wall off” or segregate the employees who
receive this information.441 These ethical walls are intended to keep Treasury’s sell
or warrant execution decisions confidential so that other parts of the firm are not
made aware of, and therefore cannot profit from, this potentially market-moving
information. To further segregate the TARP-related information, OFS has required
an IT barrier that will prevent this confidential information from being electroni-
cally accessed by others in the firm.442
Valuation Methodology
The asset managers will provide monthly valuation reports to OFS regarding
their view of the fair market value of the assets in their respective portfolios. OFS Fair Market Value: The price that a
knowledgeable buyer and a knowledge-
will also prepare audited annual financial statements that will use a net present
able seller would be able to agree upon
value (“NPV”) valuation of the assets, as is required for annual statements for
in the open market, provided that both
Government agencies under the Federal Credit Reform Act of 1990.443 The asset
have access to sufficient information.
managers are working with Treasury and each other to develop a uniform template
in order for the valuations provided by each asset manager to be consistent and to Net Present Value (“NPV”): The present
minimize any difference in approaches among the firms.444 value of the estimated future cash
inflows minus the present value of the
cash outflows.
CONFLICTS OF INTEREST
Within the framework of TARP procurement and contracting, actual or potential
conflicts of interest (“COIs”) can exist at the organizational level or pertain to an
individual employee. EESA provides the Treasury Secretary the authority to issue
regulations or guidelines necessary to address and manage, or to prohibit, COI that
can arise in connection with the administration and execution of TARP.445
TARP-related COI may occur due to a variety of situations, such as when
retained entities perform similar work for Treasury and other clients. In these situa-
tions, contracted entities may find that their duty to certain clients may impair their
objectivity when advising Treasury or may affect their judgment about the proper
use of nonpublic information. Conflicts may also arise from the personal inter-
ests of individuals employed by retained entities. Accordingly, Treasury has issued
interim guidelines to address potential COI.446
These interim COI rules require interested contractors to provide sufficient
information to evaluate the potential for organizational COI and plans to mitigate
them.447 The mitigation plan then becomes a binding term of the contract ar-
rangement. On potential personal COI, the provisions require that managers and
employees of a hired entity disclose any financial holdings or personal and familial
relationships that could impair their objectivity.448
Financial agents and contractors have identified potential COI, and these
parties have proposed solutions to mitigate the identified conflicts. In response to
recommendations made to Treasury by the Comptroller General,449 Treasury has
taken steps to formalize its oversight and monitoring of potential COI.450
S ECT I O N 5 SIGTARP RECOMMENDATIONS
One of the responsibilities of the Office of the Special Inspector General for the
Troubled Asset Relief Program (“SIGTARP”) is to provide recommendations to
the U.S. Department of the Treasury (“Treasury”) so that Troubled Asset Relief
Program (“TARP”) initiatives can be designed or modified to facilitate transparency
and effective oversight and prevent fraud, waste, and abuse. SIGTARP has made
such recommendations in both its Initial Report to Congress, dated February 6,
2009 (the “Initial Report”), and its April Quarterly Report to Congress, dated April
21, 2009 (the “April Quarterly Report”). This section sets forth SIGTARP’s new or
ongoing recommendations and summarizes Treasury’s responses to prior recom-
mendations. Appendix G sets forth Treasury’s written responses to prior SIGTARP
recommendations.
RECOMMENDATIONS RELATING TO THE

PUBLIC-PRIVATE INVESTMENT PROGRAM
The Public-Private Investment Program (“PPIP”) is a program in which
Government funds will be invested side-by-side with private investor equity to
purchase legacy assets, including the “toxic” assets widely believed to be one of the
root causes of the current financial crisis. The aspect of PPIP that has proceeded
the furthest toward implementation thus far is the Treasury-led Legacy Securities
Program. As discussed more fully in Section 2 of this report, under the Legacy
Securities Program, Treasury, through an application process, has pre-qualified
fund managers to manage Public-Private Investment Funds (“PPIFs”). The fund
managers will raise private capital for equity participation in the PPIF that will be
matched, dollar-for-dollar, with TARP funds. The PPIF will then be able either to
obtain non-recourse financing in TARP funds of up to 100% of the amount of total
equity or access even greater non-recourse financing from the Federal Reserve
through the Term Asset-Backed Securities Loan Facility (“TALF”) for purchase of
TALF-eligible assets. The fund manager, who earns a fee both from Treasury and
from the private investors, will then use the money to purchase and manage legacy
mortgage-backed securities (“MBS”).
April Quarterly Report Recommendations

In the April Quarterly Report, SIGTARP observed that many aspects of PPIP could
make it inherently vulnerable to fraud, waste, and abuse, identifying four areas of
particular vulnerability:
• Conflicts of Interest: PPIF managers might have a powerful incentive to make

investment decisions that benefit themselves at the expense of the taxpayer. By
their nature and design, including the availability of significant leverage, the
PPIF transactions in these frozen markets will have a significant impact on how
any particular asset is priced in the market. As a result, the increase in the price
of such an asset will greatly benefit anyone who already owns or manages the
same asset, potentially including the PPIF manager who is making the invest-
ment decisions.
• Collusion: A closely related vulnerability is that PPIF managers might be
persuaded, through kickbacks, quid pro quo transactions, or other collusive ar-
rangements, to manage the PPIFs not for the benefit of the PPIF (and taxpay-
ers), but rather for the benefit of themselves and their collusive partners. The
significant non-recourse, Government-financed leverage presents a great incen-
tive for collusion between the buyer and seller of the asset, or the buyer and
other buyers, whereby the taxpayer may be exposed to a significant loss while
others profit.
• Money Laundering: Because of the significant leverage available and the inher-
ent imprimatur of legitimacy associated with PPIP and TALF, these programs
present an ideal opportunity to money-laundering organizations, which are
continually looking for opportunities to make their illicit proceeds appear to be
legitimate, thereby “laundering” those proceeds.
• Interaction with TALF: In announcing the details of PPIP, Treasury has indi-
cated that PPIFs under the Legacy Securities Program could, in turn, use the
leveraged PPIF funds to purchase legacy MBS through TALF, thereby greatly
increasing Government exposure to losses with no corresponding increase of
potential profits. This leverage upon leverage would magnify the incentives for
conflicts of interest and collusion and could severely undermine the validity of
the methodology that the Federal Reserve has used to build the haircut percent-
ages in TALF.
To address these vulnerabilities, SIGTARP made a series of recommendations

in the April Quarterly Report. In summary form, SIGTARP recommended the
following:
• Treasury should impose strict conflicts-of-interest rules upon PPIF managers

that specifically address whether and to what extent the managers can (i) invest
PPIF funds in legacy assets that they hold or manage on behalf of themselves or
their clients or (ii) conduct PPIF transactions with entities in which they have
invested on behalf of themselves or others.
• Treasury should mandate transparency with respect to the participation and
management of PPIFs, including disclosure to Treasury of the beneficial owners
of all of the private equity stakes in the PPIFs, public disclosure of all transac-
tions undertaken in them, and reporting to Treasury on any and all holdings and
transactions in the same types of legacy assets on their own behalf or on behalf
of their clients.
• Treasury should require PPIF managers to provide PPIF equity stakeholders

(including TARP) “most-favored-nations clauses,” requiring that the fund man- “Most-Favored-Nations Clause”: A
agers treat the PPIFs on at least as favorable terms as given to all other parties clause in an agreement granting to one
with whom they deal and acknowledge that they owe the PPIF investors — both entity the same terms as are then or
the private investors and TARP — a fiduciary duty with respect to the manage- may thereafter be granted to any other
ment of the PPIFs. entity.
• Treasury should require that all PPIF managers have stringent investor-screen-
“Know Your Customer” Requirements:
ing procedures, including comprehensive “Know Your Customer” requirements
A money-laundering and terrorist-
at least as rigorous as that of a commercial bank or retail brokerage operation,
financing prevention measure requir-
and require that the identities of all of the beneficial owners of the private in-
ing institutions to obtain customer
terests in the fund be disclosed to Treasury so that Treasury can do appropriate
information beyond basic identification
diligence to ensure that investors in the funds are legitimate. information.
• Treasury should not allow Legacy Securities PPIFs to invest in TALF unless
significant mitigating measures are included to address the increased dangers
presented by the interaction, such as prohibiting TARP lending if the PPIF in-
vests through TALF or proportionately increasing haircuts for PPIFs that do so.
Developments in the Design of the Legacy Securities

Program
Since the April Quarterly Report, Treasury has consulted with SIGTARP, consistent
with Treasury’s obligations under Section 402 of the Helping Families Save Their Section 402 of Helping Families Save
Homes Act of 2009 (the “Ensign-Boxer Amendment”), as it developed the details Their Homes Act of 2009 (“Ensign-
of the Legacy Securities Program. Among other things, Treasury conducted these Boxer Amendment”): Amendment to
activities: Helping Families Save Their Homes Act
• met with SIGTARP representatives to discuss the design of the Legacy of 2009 that calls for increased PPIP
Securities Program on several occasions oversight and allocates an additional
$15 million to SIGTARP with the direc-
• invited SIGTARP to observe its interviews with potential PPIF manager
tion that these funds be prioritized for
applicants
performance audits and investigations
• at SIGTARP’s suggestion, met and had multiple conversations with staff at the
of recipients of non-recourse loans
Federal Reserve Board (the “Federal Reserve”) and the Federal Reserve Bank
under any EESA-funded program. See
of New York (“FRBNY”) who manage Federal Reserve programs involving asset Section 1 of this report for a detailed
managers in similar contexts description of the amendment.
• provided SIGTARP with drafts of the PPIP term sheets and ethical standards
and conflicts-of-interest rules
As a result of these consultations, SIGTARP provided Treasury with both oral

feedback and written recommendations, suggestions, and comments, as reflected
in two letters dated June 10, 2009, and June 19, 2009 (collectively, the “SIGTARP
Letters”).
In the SIGTARP Letters, which are included in Appendix G, SIGTARP
made dozens of comments, ranging from recommendations concerning issues
fundamental to the design of PPIP to potential contract terms and other drafting
comments. As reflected in Treasury’s response to SIGTARP’s PPIP recom-
mendations, also included in Appendix G, Treasury has incorporated many of
the recommendations into the design of PPIP, and, as a result, the program has a
significantly improved compliance and fraud-prevention regime than that initially
proposed. The following are some of SIGTARP’s recommendations implemented
by Treasury:
• All of the PPIF managers will be required to be registered Investment Advisors

Fiduciary Duty: A duty obligating a
fiduciary (an individual or business in a with the Securities and Exchange Commission (“SEC”) pursuant to the
position of authority who acts on behalf Investment Advisors Act of 1940. The fund managers therefore are subject to
of another individual — an agent or provisions relating to fiduciary duty; certain antifraud protections; rules relating
trustee) to act with loyalty and honesty to record keeping, advertising, custody of client funds and assets; and disclosure.
and in a manner consistent with the • Treasury is requiring PPIF managers to have and implement a range of policies
best interests of the other individual. and procedures on ethics and conflicts of interest, including policies relating to
valuation, trading allocation, arm’s-length transactions, and personal trading.
• Treasury is requiring the PPIF managers to report to Treasury a list of all eligible
assets held or under consideration for purchase by a manager in both PPIF and
non-PPIF funds, including positions and valuations in all eligible assets across
the manager firm. Treasury will thus be able to analyze and compare holdings,
transactions, and valuations not only across all of the PPIFs but also across
all of the non-PPIF funds managed by PPIF firms. If implemented well, this
information could be a powerful tool to detect instances of conflicts of interest,
collusion, and improper asset valuation across the Legacy Securities Program.
• As recommended in the April Quarterly Report, Treasury has taken into ac-
count the leverage-on-leverage issues implicated by allowing PPIFs to access
TALF lending. Although Treasury and the Federal Reserve are permitting PPIFs
Leverage on Leverage: Refers to the to access TALF, the haircuts for TALF will be proportionally increased so that
original design of PPIP in which a pri- the combination of Treasury- and TALF-supplied debt will not exceed the total
vate investor could borrow Government amount of TALF debt that would be available to leverage the PPIP equity alone.
debt through PPIP and then leverage This significant concession by Treasury adopts SIGTARP’s recommendation and
its equity and the Government debt effectively ameliorates the leverage-on-leverage and “skin-in-the-game” issues
with more Government debt through that were raised in the April Quarterly Report.
TALF.
Although Treasury has implemented most of SIGTARP’s suggestions, SIGTARP
Skin in the Game: Equity stake in an believes that there remain some significant areas in which Treasury’s plan for PPIP
investment; down payment; the maxi-
falls short. As discussed below, SIGTARP has ongoing recommendations about
mum amount an investor can lose.
PPIP, including areas that could threaten the credibility of the program. To sum
up the substantial back-and-forth between Treasury and SIGTARP concerning the
design of the PPIP compliance and anti-fraud regime since the April Quarterly
Report, the following can be stated:

1. Treasury has fulfilled its statutory obligation to consult with SIGTARP with
respect to the design of the PPIP Legacy Securities Program and has engaged
repeatedly with SIGTARP (and the Federal Reserve and FRBNY, for that mat-
ter) on the design of the compliance and anti-fraud provisions of PPIP.
2. Treasury has adopted a majority of SIGTARP’s recommendations, and the
design of the PPIP Legacy Securities Program has been vastly improved from a
compliance and anti-fraud perspective as compared to when the program was
initially described to SIGTARP.
3. However, disagreements remain, and SIGTARP believes that there remain
several fundamental vulnerabilities in the program on issues relating to conflicts
of interest and collusion, transparency, performance measures, and anti-money
laundering.
Ongoing Recommendations
Although Treasury has already identified the nine PPIF managers and released
term sheets detailing the basic framework of the PPIFs, final agreements have yet
to be drafted, and Treasury still has the opportunity to improve the program before
it is finally implemented. To that end, SIGTARP makes the following ongoing
and as yet unadopted recommendations regarding the design of the PPIP Legacy
Securities Program.
• PPIP Recommendation #1 — Strict Walls: SIGTARP continues to recom-

mend that Treasury require the imposition of strict information barriers or
“walls” between the PPIF managers making investment decisions on behalf of
the PPIF and those employees of the fund management company who man-
age non-PPIF funds. Treasury’s failure to do so thus far constitutes a material
deficiency in the program.
Treasury’s stated goal for PPIP is to “restart” the substantially frozen legacy
securities markets. By its design, PPIP will provide the PPIF managers significant
power to set prices for the legacy securities that they purchase in what Treasury has
described as an illiquid market. Under these circumstances, the trading decisions
of PPIF managers — using investment vehicles that are 75% funded by taxpayer
money — constitute valuable, proprietary, market-moving information. This price-
setting power and access to information that is unavailable to other participants in
the market (i.e., knowing what the PPIF will buy and at what price) could create
opportunities for several kinds of abuses by PPIF managers, including the incentive
to overpay for securities already held in the manager’s non-PPIP funds or to use
information about upcoming trading in PPIP to benefit its non-PPIF funds to the
detriment of the PPIF or to those participants in the market that were not selected
by Treasury to manage PPIF funds.
A common method of dealing with this situation in which proprietary informa-
tion in one part of a business could lead to improper advantages in another part
of the business is the imposition of strict information barriers or walls wherein
the market-moving information is insulated, or walled off, from the rest of the
firm through separation of employees, facilities, or technology and/or policies and
procedures limiting dissemination of the information. Here, SIGTARP believes that
the best practice would be to impose a wall similar to those imposed by FRBNY in
several of its financial crisis-related programs that would separate those individuals
making investment decisions for the PPIF from pertinent information concerning
non-PPIF funds, and vice-versa, but allowing fund managers to access the more
general expertise of the firm, such as market research. Such a wall should also
include information technology barriers, strict policies forbidding the dissemination
of PPIF information within the firm, and a rigorous compliance regime to ensure
enforcement of those policies. Thus, it would prohibit individuals making invest-
ment decisions for the PPIF from managing other funds involving eligible assets.
Treasury has refused to require walls in PPIP despite the fact that such walls
have been imposed upon asset managers in similar contexts in other Government
bailout-related programs, including by Treasury itself in other TARP-related activi-
ties. For example, walls between the asset managers working for the Government
and the rest of their firms are required in at least the following programs:
• FRBNY’s Agency MBS Purchase Program (involving Goldman Sachs, PIMCO,

BlackRock, Wellington)
• FRBNY’s Commercial Paper Funding Facility (PIMCO)
• FRBNY’s management of the Maiden Lane I, II, and III portfolios (BlackRock)
• In TALF, ethical walls are required for the collateral monitor that is tasked
with providing advice to FRBNY on MBS valuations, and primary dealers have
submitted conflict remediation plans that confirm that they have imposed walls
isolating their business units that interact with TALF
• Treasury’s management of assets obtained in TARP generally through financial
agents (AllianceBernstein, FSI, Piedmont)
• TARP’s Unlocking Credit for Small Businesses Program (“UCSB”) (Earnest
Partners)
Indeed, of the nine asset managers selected by Treasury to manage PPIFs, one-
third of them (BlackRock, Wellington, and AllianceBernstein) are already required
to operate walls in connection with other Government programs.
Notwithstanding the fact that walls are common when a firm has access to
information that it could use to the unfair advantage of others (i) in the industry
generally, (ii) in other Government bailout program contexts, (iii) in other TARP-
related programs, and (iv) with respect to at least some of the very firms that were
selected as PPIF managers, Treasury has “concluded that such an arrangement is
simply not practical in the context of PPIP.” In supporting this statement, Treasury
has explained its positions, which SIGTARP summarizes below:
1. Treasury first suggests that “[r]equiring a segregated investment team would be

likely to reduce investment performance of the PPIF,” arguing in particular that
a segregation would preclude the PPIF from gaining the expertise of a manager’s
“A Team” (the most experienced and talented managers at a company) and
would hinder “team-oriented” investment processes.
In this argument, Treasury seems to be suggesting that it can obtain either

talented managers or managers without inherent conflicts, but not both. Although
SIGTARP noted in the April Quarterly Report that there may be difficulty selecting
an experienced manager that is also non-conflicted, SIGTARP believes that such a
dichotomy offers a false choice. In light of the amount of taxpayer money being in-
vested in the PPIFs, Treasury should have the negotiating power to obtain compe-
tent and unconflicted management for the PPIFs. If a particular fund management
company cannot accommodate that basic requirement, then Treasury should reject
that company and retain one that can. Moreover, even if the dichotomy were as
Treasury describes, in light of the substantial risks that a non-segregated manager
presents to the taxpayer, to the PPIF private equity investors, and to the market as a
whole, SIGTARP submits that the program may very well be better served by com-
petent, non-conflicted personnel even if they do not fit into Treasury’s definition of
what would constitute an “A Team.”
2. Treasury next suggests that requiring segregated investment teams would actu-
ally increase risk “by limiting fund manager participation in the PPIP,” arguing
in particular that: many fund managers have indicated that they would withdraw
if required to use a segregated investment team and thus Treasury would have
to concentrate its investments in the hands of a few fund managers; requiring
segregation would “undermine protections against fund manager misconduct,”
because the team approach provides “checks and balances within the organi-
zation;” and implementing a wall would be time consuming, costly, and not
feasible for many firms.
To the extent that Treasury suggests that segregation would decrease participa-
tion and thus lead to increased reliance on a few managers, it is not convincing that
Treasury cannot find sufficient numbers of non-conflicted management compa-
nies to do the job. Again, Treasury, which has the power to adjust its eligibility
requirements for fund managers, should have sufficient bargaining power to

mandate appropriate segregation in a sufficient number of firms (more than one
hundred companies initially applied), particularly in light of the fact that three
of its nine PPIF managers already abide by such walls in connection with other
Government programs. In any event, even if segregation would lead to using fewer
or different kinds of firms, in light of the seriousness of the risks associated with
non-segregation of managers, it may well be that the program would be better
served by a substantially different mix of non-conflicted firms rather than the cur-
rent group of firms that are apparently unwilling to mitigate fully their conflicts.
To the extent that this argument suggests that a wall would somehow increase
the risk of misconduct by limiting detection opportunities among the “team,”
SIGTARP believes that such argument is without merit. Walls limit information
flow between investment decision makers on one side of the wall and investment
decision makers on the other; nothing about the institution of a wall minimizes
compliance scrutiny or general supervision. To accept Treasury’s argument might
suggest that Treasury and FRBNY are increasing the risk of misconduct in a whole
series of Government programs in which they require walls, including TARP-
related programs, a contention that SIGTARP squarely rejects. At their core, walls
or information barriers are designed to prevent an unfair benefit to the firm as a
whole; it is simply not persuasive to argue that wider dissemination of such confi-
dential, market-moving information would somehow reduce, rather than increase,
that risk.
3. Treasury suggests that requiring segregated investment teams is not neces-

sary, arguing in particular that (i) the PPIF managers “will not have material
non-public information from Treasury,” that Treasury is nothing but a passive
investor that will not be sharing its market views, and that the most analogous
FRBNY program is TALF, which does not involve similar segregation for TALF
borrowers; (ii) that the other mitigation procedures are sufficient; and (iii) that a
wall will not completely eliminate the risks of misconduct.
The first part of this argument does not address the core risks associated with
the market power being conveyed upon the individual fund managers. Although
there may be differences between the mechanics of some of the Government pro-
grams in which walls are required, they are distinctions without a difference. PPIP
is structured in such a way that its managers have the ability — through massive
amounts of taxpayer funds — to move, indeed, to set, prices in illiquid markets,
an ability they would not have absent the Government funds with which they are
being entrusted. That, in turn, makes information about PPIP transactions (what
securities will be bought, and for how much) extremely valuable, irrespective of
whether the decisions are being made by the PPIF manager or by Treasury, and
irrespective of whether the investment decision is based on the fund manager’s

analysis, proprietary Treasury information, or for that matter, by random chance.
Recently, a Treasury official, in explaining Treasury’s decision to require a wall for
those asset managers working for Treasury in connection with the CPP program,
stated that walls are commonly used when a party has access to “market-moving,”
proprietary information, such as Treasury’s decision to sell certain assets. In PPIP,
there can be no reasonable dispute that a PPIF manager’s decision to buy a par-
ticular MBS at a particular price with hundreds of millions of dollars of taxpayer
funds is market-moving, proprietary information. Moreover, Treasury’s argument
that the walls in other Government programs are designed to prevent the sharing
of the Government’s market views fails to address the strict walls that are required
by FRBNY for BlackRock in the Maiden Lane portfolios in which BlackRock has
discretion over the trading activities, much like the PPIF managers. Indeed, it is
worth noting that Treasury’s PPIP ethical standards recognize the value of this
information by imposing a rule that individual PPIF managers may not share their
purchase decisions with investors or other fund managers (even though the PPIF
managers themselves are permitted to manage other funds while having access to
this same information). The most straightforward and comprehensive protection
against the improper use of market-moving information is an effective wall.
Treasury’s citation to the fact that TALF borrowers need not establish walls is
also not persuasive. Individual TALF borrowers do not have the price-setting power
that PPIF managers will have, and TALF, unlike PPIF, was not designed so that any
single market participant would have the ability to set prices in an illiquid market.
A better comparison within TALF is the relationship with the new collateral moni-
tor (which provides certain valuation services to FRBNY), which is required to
maintain appropriate walls.
SIGTARP believes that Treasury’s next point — that the alternative mitigation
provisions in the program are sufficient — both underestimates the efficacy of walls
and overestimates the ability to predict the ways that a fund manager can devise
to take advantage of proprietary information. As noted above, Treasury is imposing
some significant provisions to mitigate the absence of a wall; the allocation policy,
for example, if properly implemented, should diminish the risk of “front running,”
i.e., using the PPIF trading information to buy securities at a relatively cheap price
before the PPIF purchases move the market in those securities. Similarly, requiring
the fund manager to have its own “skin in the game” will also help align its interests
with the taxpayers’ to a certain degree. These alone, however, are not sufficient.
Imagine a PPIF manager who is deciding which of 10 similar residential mortgage- Front Running: Entering into a trade
backed securities (“RMBS”) the PPIF will purchase. The fund manager knows while taking advantage of advance
that the PPIF purchase will significantly increase the market price of whichever knowledge of pending orders from
security is selected. With a wall in place, the manager should have every incentive other investors.
to purchase the best securities at the lowest prices. Without a wall, the manager
may already be managing a fund with a substantial position in one of those 10

RMBS, and thus the manager would have every incentive to buy only that security,
irrespective of quality, and at a price as high as possible in order to drive up the
non-PPIF fund performance and thus the manager’s own personal compensation.
There are currently no mitigation procedures to address this issue, and indeed,
there is nothing in place that would prevent a pre-approved manager from using
the time period between his selection and the launch of the program from building
a position in a security in non-PPIF funds with the intent of later using taxpayer
funds to drive up the price of the security (and therefore his personal compensa-
tion). Only by imposing a wall, and fully aligning the manager’s compensation with
the PPIF’s performance, can this danger be averted.
Even more fundamentally, a wall may provide some protection against the
myriad other ways in which information on one side of the wall or the other could
be used to generate illicit gains in non-PPIF funds. Can a creative manager make
a profit by trading in the equity of an institution from which a PPIF is purchasing
MBS? If a manager knows that the PPIF will be investing heavily in a particular
MBS, can that manager participate in a derivative transaction involving that same
security and thereby reap profits? Is there a member of the firm on the non-PPIF
side of the wall who is willing to sell proprietary PPIF trading information to an-
other firm? No one can answer these questions definitively, but one thing is certain:
a wall will likely decrease the risks of these and similar unpredictable bad scenarios.
If nothing else, the reputational risk that Treasury and the program face if a
PPIF manager generates massive profits in its non-PPIF funds as a result of an un-
fair informational advantage justifies the imposition of a wall. If this occurs, failure
to impose a wall, on the other hand, will leave Treasury vulnerable to an accusation
that has already been leveled against it by members of Congress and the media —
that Treasury is using TARP to pick winners and losers and that, by granting certain
firms the PPIF manager status, Treasury is benefiting a chosen few at the expense
of the dozens of firms that were rejected, the market as a whole, and the American
taxpayer. This reputational risk is not one that can be readily measured in dollars
and cents, but is a risk that could jeopardize what is left of the fragile trust the
American people have in TARP and, by extension, their Government. As FRBNY
has learned through developing its own programs, imposition of a wall is a small
price to pay to guard against such risk.
• PPIP Recommendation #2 — Disclosure of Trading Activities in the

PPIFs: SIGTARP recommends that Treasury periodically disclose PPIF trading
activity and require PPIF managers to disclose to SIGTARP, within seven days
of the close of the quarter, all trading activity, holdings, and valuations so that
SIGTARP may disclose such information, subject to reasonable protections, in
its quarterly reports.
As a matter of basic transparency, in light of the billions of dollars of taxpayer

equity and loans that provide the majority of funding for the PPIFs, the public
should be permitted to know, to the greatest extent possible, the activity and
holdings in the PPIFs. Such transparency not only dissuades misconduct and
promotes sound management, but also promotes a better public understanding
of PPIP and thus enhances the credibility of PPIP and TARP more broadly. Even
more importantly, the most significant investors in each PPIF, the American tax-
payers, have a right to know the status of their investments. The lack of transpar-
ency as to what use TARP funds were put by recipients in other TARP programs,
in SIGTARP’s view, has damaged the credibility of TARP and therefore may have
threatened its viability; Treasury should not repeat that apparent error with PPIP.
Moreover, disclosure of the PPIF transactions, and in particular the price at which
such transactions occur, would appear to be required to bring about the “price
discovery” that Treasury has claimed as one of the core purposes of PPIP. Failure
to provide transparency on trading prices and valuations creates a “tree falling in
the woods problem:” without such transparency, the market (other than the PPIF
managers themselves) is far less likely to “discover” market prices in a way that will
facilitate re-starting trading outside of Government-supported efforts.
Unfortunately, Treasury has stated that it will not require such disclosure “as
this would [do] harm to the fund’s operation by revealing competitive and propri-
etary information regarding the fund’s investment positions and strategy.” Instead,
Treasury intends to disclose no more than the bare minimum required by stat-
ute — disclosure of only the 10 largest positions held in each PPIF. SIGTARP is
cognizant of the fact that certain trading information may have, for a time, signifi-
cant proprietary value and is not advocating unreasonably premature disclosure.
However, Treasury’s default position should be in favor of disclosure in a manner
designed to promote price discovery in the legacy securities markets and to pro-
mote transparency. SIGTARP has expressed its willingness to work with Treasury
to find the right balance among the proprietary interests of the PPIF managers,
the public’s interests in transparency, and the broader market’s interests in price
discovery.
In light of Treasury’s refusal to publish this information, to meet a basic level
of transparency, and to meet SIGTARP’s statutory obligation to report to Congress
for the preceding quarter “all purchases” of troubled assets, “[a] list of the troubled
assets purchased,” and “the profit or loss incurred on each sale” of such assets,
SIGTARP intends to include in its quarterly report the identity of the securities
purchased, the purchase price, the amounts held, the sale prices, and the value
of the taxpayer’s positions, redacted as appropriate to avoid the dissemination of
any confidential information that could harm the PPIF investment.451 Although
Treasury has designed PPIP so that the troubled assets are technically its interests
in the PPIFs, and not the actual toxic assets they purchase, SIGTARP does not
believe that this absolves it from complying with the spirit, if not the letter, of its
EESA requirements. These categories of information are no different than that
typically disclosed on a periodic basis by mutual funds, for example, in SEC Forms
N-Q and N-CSR. To fulfill this role, and in order to keep constant SIGTARP’s
Quarterly Report production schedule of providing transparency with the shortest
delay possible, SIGTARP would need such data, along with any claims of confi-
dentiality, within seven days of the end of a quarter; Treasury has indicated that
delivery within 15 days would be “reasonable and consistent with industry prac-
tice.” Such a 15-day delivery would force SIGTARP to alter its scheduled issuance
of Quarterly Reports by more than a week. Unless delivery within seven days proves
impossible, “industry practice” should not interfere with timely transparency.
• PPIP Recommendation #3 — Performance Metrics and Removal of the

Manager: SIGTARP recommends that appropriate metrics be defined and an
evaluation system be put in place to monitor the effectiveness of the PPIF man-
agers, both to ensure that they are fulfilling the terms of their agreements and
to measure their performance. The conditions that would give Treasury “cause”
to remove a manager should be expanded to include a manager’s performance
below a certain standard benchmark, or if Treasury concludes that the manager
has materially violated compliance or ethical rules.
Treasury has indicated that it is in the process of developing appropriate

measurement metrics, and SIGTARP will monitor the progress on this issue. As
drafted, however, the provision in the term sheet relating to the removal of the
PPIF manager may significantly limit Treasury’s ability to remove a manager for
poor performance or even for other significant malfeasance. As drafted, for ex-
ample, Treasury may, in essence, only remove a manager with the consent of a
majority of the private equity interests or for “cause.” Cause includes a breach of
the capital contribution requirement or a formal (i.e., judicial) finding of fraud,
gross, negligence, bad faith or willful misconduct, securities law violation, or a con-
viction or guilty plea of a felony.452 To use an extreme example, if a fund manager is
arrested for stealing from Treasury’s equity portion of the PPIF for the benefit of its
private investors, Treasury could not remove that manager until the manager was
convicted (which could take years) unless a majority of the private equity investors
(who, in this example, are the beneficiaries of the crime) consent. In light of the
very significant role of TARP funds in the PPIFs, Treasury should obtain the ability
to remove managers unilaterally under appropriate circumstances.
• PPIP Recommendation #4 — Disclosure of Holdings and Transactions in

Related Assets: SIGTARP recommends that Treasury require fund managers to
disclose to Treasury, as part of the Watch List process outlined in the PPIP term
sheet, not only information about holdings in eligible assets but also holdings in
related assets or exposures to related liabilities.
As discussed previously in this section, at SIGTARP’s suggestion, Treasury is

requiring PPIF managers to disclose to Treasury information about holdings in
eligible assets not only in the PPIF but also in the managers’ non-PPIF funds. This
is a very substantial step in the right direction and will be, if implemented properly,
a powerful tool to detect issues arising from conflicts of interest, collusion, and im-
proper valuation. Treasury, however, has so far refused to require reporting beyond
eligible assets, and SIGTARP views this as a significant limitation. There are many
asset types or liability exposures that could be held in a manager’s non-PPIF fund
whose value is predictably tied to eligible assets and thus should be disclosed. For
example, credit default swaps or other derivative products could change in value
based upon a manager’s PPIF investment decisions. Treasury should require disclo-
sure about any such assets or potential liabilities.
• PPIP Recommendation #5 — Beneficial Ownership Issues: Treasury should

require PPIF managers to obtain and maintain information about the beneficial
ownership of all of the private equity interests, and Treasury should have the
unilateral ability to prohibit participation of private equity investors.
To its credit, Treasury has adopted many of the anti-money laundering and
“Know Your Customer” suggestions made by SIGTARP. However, two significant
issues remain. First, although PPIF managers must provide Treasury with all infor-
mation in their possession with respect to beneficial ownership of the private equity
interests, those rights are meaningless unless managers are required to obtain and
maintain such information in the first instance. Treasury should make that obliga-
tion explicit. Moreover, Treasury should insist upon the unilateral right to prohibit
participation of certain private investors. The resources to screen investors that
are available to the managers simply do not match the resources of Treasury. If the
Government finds that a potential investor is the subject of a criminal investigation,
for example, that fact might not be discoverable by the manager or discloseable by
Treasury. The terrible toll on the program resulting from participation by organized
crime, terrorists, or fraudsters mandates that Treasury have unilateral authority to
prohibit participation without explanation.
CONTINUED USE OF RATINGS AGENCIES IN TALF

SIGTARP made a series of recommendations to Treasury with respect to its par-
ticipation in the implementation of TALF in both its Initial Report and its April
Quarterly Report. Because the recommendations impact the Federal Reserve and
FRBNY as the primary implementers of TALF, since January, SIGTARP has been
in regular contact with the Federal Reserve and FRBNY to discuss those recom-
mendations and the TALF compliance and anti-fraud regime more generally. The
Federal Reserve and FRBNY have engaged constructively in those discussions,
have adopted many of the recommendations, and have independently developed
additional protections. As a result, TALF’s design is far better, from a compliance
and anti-fraud perspective, than it was when the program was first announced.
The status of the implementation of SIGTARP’s recommendations is set forth
in Table 5.1 later in this section, and two letters from the Federal Reserve to the
Special Inspector General describing plans for bolstering the protections in con-
nection with the expansion of TALF to commerical mortgage-backed securities
(“CMBS”), dated May 5, 2009, and May 22, 2009, are included in Appendix G:
“Correspondance Regarding SIGTARP Recommendations.”
In the April Quarterly Report, one of SIGTARP’s recommendations was that,
with respect to the potential expansion of TALF to legacy RMBS, rating agency
determinations should be dispensed with and a security-by-security screening for
each legacy RMBS be implemented instead. Although the decision of whether
RMBS will be permitted to be used as collateral in TALF is still under consider-
ation, the Federal Reserve and FRBNY have informed SIGTARP that, in designing
the TALF provisions relating to CMBS, they have taken several steps to reduce the
importance of ratings from the credit rating agencies in determining the eligibility
of CMBS. For example, FRBNY has engaged a collateral monitor that will assist
it in excluding high-risk CMBS regardless of its rating. Although these measures
represent a significant improvement of TALF, ratings from credit rating agencies
remain an important, although not exclusive, asset-eligibility prerequisite in TALF:
newly issued ABS must receive a AAA rating from two of three credit rating agen-
cies (Standard & Poor’s, Moody’s Investors Service, and Fitch Ratings) and not
have a rating of less than AAA from the third agency. For newly issued CMBS, a
AAA rating is required from two of five eligible agencies (adding DBRS Inc. and
Realpoint LLC) and, again, no lower rating from the other three can exist.
Since SIGTARP’s April Quarterly Report, there have been several developments
that raise additional concerns about TALF’s use of ratings agencies. Most ratings
agencies, by the nature of their business model, have inherent conflicts of interest
— they are paid by the issuers of the very securities that they are rating. As a result,
the agency has an incentive to issue a high rating to attract future business from
that issuer. As one commentator recently characterized the conflict, it would be as
if Hollywood studios paid movie critics to review their films: any individual critic
would have a strong incentive to give a particular film a good review, even if it was
terrible, out of fear that the studio would not give the critic future business. This
inherent conflict played out with disastrous consequences in the recent credit crisis
in which AAA ratings for many MBS, in particular certain classes of RMBS, had
little or no relation to the creditworthiness of the securities.
Over the last quarter, there has been reporting that these conflicts may be
impacting TALF. For example, Moody’s Investors Services (“Moody’s”), one of the
major agencies that has been qualified to rate all TALF securities, has complained
of a “race to the bottom,” in which issuers are selecting other agencies to rate TALF
securities because they are employing lower standards and therefore are more likely
to give a potential TALF security the necessary AAA rating. Although SIGTARP has
not yet undertaken any independent review of Moody’s claims, its complaints fur-
ther highlight the dangers of relying on these inherently conflicted institutions. The
expansion from three to five of the number of rating agencies from which the issuer
may obtain ratings with respect to newly issued CMBS (albeit with one, Realpoint,
that does not receive payment from issuers), without an increase in the number of
AAA ratings required, has the potential of giving issuers more incentives and oppor-
tunities to take advantage of the conflicts inherent in the ratings process.
Recommendation
• SIGTARP recommends that Treasury and FRBNY examine Moody’s assertions
and develop mechanisms to ensure that acceptance of collateral in TALF is
not unduly influenced by the improper incentives to overrate that exist among
the rating agencies. This may include further limiting the importance of credit
ratings in TALF eligibility decisions, continuing to develop alternative methods
of evaluating the creditworthiness of TALF collateral, and/or proportionally
increasing the number of required AAA ratings from credit agencies whenever
there is an increase in the number of eligible agencies.
In response to this recommendation, the Federal Reserve has indicated that it

has discussed these concerns with the rating agencies and will continue to develop
and enhance its risk management tools and processes as it refines the design of the
expanded TALF.
REQUIRING RECIPIENTS TO ACCOUNT FOR USE

OF TARP FUNDS
From its inception, SIGTARP has advocated that, as a matter of fundamental
transparency, Treasury should require TARP recipients to disclose what they have
been able to do with TARP funds, and SIGTARP has made formal recommenda-
tions along these lines in both its Initial Report and its April Quarterly Report.
With the exception of mandating such reporting in a few of the extraordinary as-
sistance agreements — most notably the Citigroup and Bank of America Targeted
Investment Program (“TIP”) agreements and Treasury’s recent agreement with
American International Group, Inc. (“AIG”) — Treasury has refused to adopt this
recommendation, arguing that the fungible nature of money would make such
reports not “meaningful.” Treasury instead decided to track the effects of the TARP
funds by measuring institutions’ lending over time.
As a result of Treasury’s refusal to require reporting more broadly on actual
TARP fund use, SIGTARP decided to undertake the task itself by conducting a
survey of more than 360 institutions that had received TARP funds through the
end of January 2009. The results of the survey demonstrate that, despite the inher-
ent fungibility of money, financial institutions are capable of providing at least basic
narrative descriptions of how they used TARP funds. Although most banks reported
that they did not segregate or track TARP fund usage on a dollar-for-dollar basis,
they were able to provide insights into their actual or planned use of TARP funds;
indeed, more than 98% of survey recipients reported their actual uses of TARP
funds. Moreover, the results show that institutions commonly have used TARP
funds in ways that will not immediately or directly register on a bank’s lending re-
port. In addition to activities that would directly lead to lending, for example, banks
reported that TARP funds have been used in these ways:
• to increase capital cushions to absorb unexpected losses

• to purchase mortgage-backed securities, thus not resulting in lending by the
bank itself, but supporting lending by other institutions in the MBS pipeline
• to pay down debt, thus de-leveraging the bank’s balance sheet and improving its
ability to withstand further economic downturn
• to acquire other banks
All of these activities could be, depending on the circumstances, considered

commercially reasonable, yet would not necessarily be captured by Treasury’s lend-
ing surveys.
Treasury’s reasons for refusing to adopt this recommendation have been

squarely refuted by SIGTARP’s audit results and are belied by Treasury’s own
inclusion of use of funds provisions in its agreements with AIG, Bank of America,
and Citigroup. Further, the claim that the information provided by banks would be
“unreliable” is contradicted both by the threat of criminal penalty should a bank
be untruthful to Treasury, and Treasury’s reliance on self-reporting throughout its
compliance regime. Imposition of a condition designed to foster basic transparency
should not be used as a punitive measure required of only those institutions that
are compelled to seek extraordinary assistance, but rather should be an integral
feature of TARP as a whole.
Ongoing Recommendation
• To improve transparency over the use of funds, SIGTARP continues to recom-
mend that the Treasury Secretary require TARP recipients to submit periodic
reports to Treasury on their use of funds, including what they were able to do
with their TARP funds, such as lending, investments, acquisitions, and other
activities that they could not have conducted without TARP funding. SIGTARP
also recommends that the Treasury Secretary require TARP recipients to retain
all supporting documentation in conjunction with any reporting requirement
that Treasury may impose.
TRACKING THE IMPLEMENTATION OF

RECOMMENDATIONS IN PREVIOUS REPORTS
SIGTARP has now made dozens of individual recommendations, and updating
compliance of each one in narrative form is quickly becoming impractical. The
following table, Table 5.1, summarizes SIGTARP’s prior recommendations, gives an
indication of SIGTARP’s view of the level of implementation to date, and provides
a brief explanation for that view where necessary. For more details on the recom-
mendations, readers are directed to the Initial Report and April Quarterly Report.
Treasury’s views on the level of implementation of the recommendations are set
forth in a letter to the Special Inspector General dated July 2, 2009, which is in-
cluded in Appendix G: “Correspondence Regarding SIGTARP Recommendations.”
TABLE 5.1
SIGTARP RECOMMENDATIONS TABLE 188

Partially Not
Recommendation Implemented Implemented In Process Implemented TBD Comments
Treasury should include language in the automobile industry

transaction term sheet acknowledging SIGTARP’s oversight
1
role and expressly giving SIGTARP access to relevant docu-
ments and personnel.
X
Treasury should include language in new TARP agreements
to facilitate compliance and oversight. Specifically, SIGTARP
recommends that each program participant should (1) ac-
knowledge explicitly the jurisdiction and authority of SIGTARP
and other oversight bodies, as relevant, to oversee compli- Although Treasury has made substantial ef-
ance of the conditions contained in the agreement in question, forts to comply with this recommendation in
2 (2) establish internal controls with respect to that condition, many of its agreements, there are exceptions,
(3) report periodically to the Compliance department of the including in its agreements with servicers in
Office of Financial Stability (“OFS-Compliance”) regarding the MHA.
implementation of those controls and its compliance with
the condition, and (4) provide a signed certification from an
appropriate senior official to OFS-Compliance that such report
is accurate. X
Treasury agreed to do so in late January, but
as of the drafting of this report, it has still
SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM
All existing TARP agreements, as well as those governing new not posted 220 CPP agreements as well as
3 transactions, should be posted on the Treasury website as contracts with Bank of America (TIP) and TALF
soon as possible. on its website listing of contracts. Treasury
has stated that it will have all agreements on
X its website by August 15, 2009.
Treasury requires all TARP recipients to report on the actual
4 See discussion in this section.
use of TARP funds. X
Treasury quickly determines its going-forward valuation meth-
5
odology. X
Treasury begins to develop an overall investment strategy to
6 address its portfolio of stocks and decide whether it intends to
exercise warrants of common stock. X
Although Treasury and the Federal Reserve
In formulating the structure of TALF, Treasury should consider
have not adopted minimum underwriting
requiring, before committing TARP funds to the program, that
standards in TALF, they have adopted other
7 certain minimum underwriting standards and/or other fraud
significant fraud prevention and credit protec-
prevention mechanisms be put in place with respect to the
tion measures. SIGTARP will continue to moni-
ABS and/or the assets underlying the ABS used for collateral.
X tor the effectiveness of these measures.
Agreements with TALF participants should include an acknowl-
edgement that: (1) they are subject to the oversight of OFS-
Compliance and SIGTARP, (2) with respect to any condition im-
8 posed as part of TALF, that the party on which the condition is
imposed is required to establish internal controls with respect
to each condition, report periodically on such compliance, and
provide a certification with respect to such compliance. X
SIGTARP RECOMMENDATIONS TABLE (CONTINUED)
Partially Not
Treasury should give careful consideration before agreeing to Implementation is in process with respect to
the expansion of TALF to include MBS without a full review of CMBS, as discussed earlier in this section,
9
risks that may be involved and without considering certain mini- but remains to be determined with regard to
mum fraud protections. X RMBS.
Treasury should oppose any expansion of TALF to legacy MBS Although expansion of TALF to legacy CMBS
10 without significant modifications to the program to ensure a full is in process, no decision has been made with
assessment of risks associated with such an expansion. X respect to including legacy RMBS.
Although Treasury is in the process of
developing a valuation strategy, it has not
committed to making its estimate of the value
Treasury should formalize its valuation strategy and begin
11 of its investments public on more than the
providing values of the TARP investments to the public.
minimum required by statute — annually —
even though it is receiving monthly valuation
X summaries from its asset managers.
The Federal Reserve and Treasury continue to
Treasury and the Federal Reserve should provide to SIGTARP, oppose this basic aspect of transparency in
12 for public disclosure, the identity of the borrowers who sur- the TALF program. SIGTARP intends to revisit
render collateral in TALF. this issue with the Federal Reserve once a
X collateral surrender takes place.
13 In TALF, Treasury should dispense with rating agency deter-
minations and require a security-by-security screening for
each legacy RMBS. Treasury should refuse to participate if
the program is not designed so that RMBS, whether new or
No decision has yet been made with respect
legacy, will be rejected as collateral if the loans backing par-
to expanding TALF to include RMBS.
ticular RMBS do not meet certain baseline underwriting criteria
or are in categories that have been proven to be riddled with
fraud, including certain undocumented subprime residential
mortgages. X
14 In TALF, Treasury should require significantly higher haircuts Implementation is in process with respect to
for all MBS, with particularly high haircuts for legacy RMBS, or CMBS, as discussed earlier in this section,
other equally effective mitigation efforts. but remains to be determined with regard to
X RMBS.
15 Treasury should require additional anti-fraud and credit protec- Implementation is in process with respect to
tion provisions, specific to all MBS, before participating in an CMBS, as discussed earlier in this section,
expanded TALF, including minimum underwriting standards and but remains to be determined with regard to
other fraud prevention measures. X RMBS.
16 Treasury should design a robust compliance protocol with
complete access rights to all TALF transaction participants for
itself, SIGTARP, and other relevant oversight bodies. X
17 Treasury should not allow Legacy Securities PPIFs to invest Term sheets indicate that Treasury will adopt
in TALF unless significant mitigating measures are included to this recommendation through mitigating
address these dangers. measures that address the concerns raised
X by this recommendation.
18 All TALF modeling and decisions, whether on haircuts or any
QUARTERLY REPORT TO CONGRESS I JULY 21, 2009
other credit or fraud loss mechanisms, should account for po-

tential losses to Government interests broadly, including TARP
funds, and not just potential losses to the Federal Reserve. X
189
SIGTARP RECOMMENDATIONS TABLE (CONTINUED) 190
Partially Not
19 Treasury should address the confusion and uncertainty on
Although not immediate or final, Treasury did
executive compensation by immediately issuing the required
issue regulations on June 15, 2009.
regulations. X
20 Treasury should significantly increase the staffing levels of
OFS-Compliance and ensure the timely development and imple-
mentation of an integrated risk management and compliance
program. X
21 Treasury should require CAP participants to (1) establish an
internal control to monitor their actual use of TARP funds, (2)
provide periodic reporting on their actual use of TARP funds,
(3) certify to OFS-Compliance, under the penalty of criminal Treasury has reported that in its draft docu-
sanction, that the report is accurate, that the same criteria of ments it is including “most of the suggestions
internal controls and regular certified reports should be applied of SIGTARP,” but is refusing to adopt a use of
to all conditions imposed on CAP participants, and (4) acknowl- funds reporting requirement.
edge explicitly the jurisdiction and authority of SIGTARP and
other oversight bodies, as appropriate, to oversee conditions
contained in the agreement. X
22 Treasury should impose strict conflicts-of-interest rules upon
PPIF managers across all programs that specifically address
whether and to what extent the managers can (i) invest PPIF
SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM
funds in legacy assets that they hold or manage on behalf of See discussion in this section.
themselves or their clients or (ii) conduct PPIF transactions
with entities in which they have invested on behalf of them-
selves or others. X
23 Treasury should require that all PPIF fund managers (1) have
stringent investor-screening procedures, including comprehen-
sive “Know Your Customer” requirements at least as rigorous
as that of a commercial bank or retail brokerage operation to
prevent money laundering and the participation of actors prone See discussion in this section.
to abusing the system, and (2) be required to provide Treasury
with the identities of all of the beneficial owners of the private
interests in the fund so that Treasury can do appropriate dili-
gence to ensure that investors in the funds are legitimate. X
24 Treasury should require most-favored-nation clauses, PPIF
managers to acknowledge that they owe Treasury a fiduciary Term sheets indicate that Treasury will adopt
duty, and that each manager adopt a robust ethics policy and this recommendation.
compliance apparatus. X
25 Treasury should require servicers in MHA to submit third-party Treasury is requiring servicers to obtain and
verified evidence that the applicant is residing in the subject retain such information, which is a significant
property before funding a mortgage modification. improvement, but is not requiring submission
of such evidence prior to authorizing funding
to the servicers. It is, however, considering
protocols whereby an agent will obtain third-
party verification of residence during the loan
X review process.
SIGTARP RECOMMENDATIONS TABLE (CONTINUED)
Partially Not
26 In MHA, Treasury should require a closing-like procedure be
conducted that would include (1) a closing warning sheet that
would warn the applicant of the consequences of fraud; (2)
the notarized signature and thumbprint of each participant; Treasury is not adopting a closing-like
(3) mandatory collection, copying, and retention of copies of procedure or addressing many aspects of
identification documents of all participants in the transaction; this recommendation. It is, however, requiring
(4) verbal and written warnings regarding hidden fees and certain written requirements: (1) a fraud
payments so that applicants are made fully aware of them; (5) warning sheet to each applicant, (2) warnings
the benefits to which they are entitled under the program (to about fees, (3) requiring servicers to maintain
prevent a corrupt servicer from collecting payments from the records of payment allocation.
Government and not passing the full amount of the subsidies
to the homeowners); and (6) the fact that no fee should be
charged for the modification. X
27 Additional anti-fraud protections should be adopted in MHA to
verify the identity of the participants in the transaction and to
Treasury has stated that it will take steps to
address the potential for servicers to steal from individuals
address this recommendation.
receiving Government subsidies without applying them for the
benefit of the homeowner. X
28 In MHA, Treasury should require the servicer to compare the After refusing to adopt this recommendation,
income reported on a mortgage modification application with Treasury has adopted an alternative method
the income reported on the original loan application. of income verification at SIGTARP’s
X recommendation.
29 In MHA, Treasury should require that verifiable, third-party in-
formation be obtained to confirm an applicant’s income before
any modification payments are made. X
30 In MHA, Treasury should defer payment of the $1,000 incen- Treasury has not addressed the deficiency
tive to the servicer until after the homeowner has verifiably identified in SIGTARP’s April Quarterly Report.
made a minimum number of payments under the mortgage It continues to rely on servicer representa-
modification program. tions that the homeowner has made three trial
payments before entering the program, but
does not require any minimum payments after
X a mortgage enters the program.
31 In MHA, Treasury should proactively educate homeowners
about the nature of the program, warn them about modification
rescue fraudsters, and publicize that no fee is necessary to
participate in the program. X
32 In MHA, Treasury should require its agents to keep track of the Treasury has refused to adopt this significant
names and identifying information for each participant in each anti-fraud measure designed to detect insid-
mortgage modification transaction and to maintain a database ers who are committing large-scale fraud.
of such information. This represents a material deficiency in the
X MHA anti-fraud regime.
QUARTERLY REPORT TO CONGRESS I JULY 21, 2009
191
ENDNOTES
1. Treasury, response to SIGTARP data call, 7/8/2009.
2. Treasury, Transactions Report, 7/2/2009, http://www.financialstability.gov/docs/transaction-reports/transactions-report_070209.pdf, accessed 7/8/2009.
3. Congress, “S. 896 As Amended; Helping Families Save Their Homes Act of 2009,” 5/6/2009, http://www.congress.org/congressorg/issues/votes/?votenum=185&chamber=S&congress=1111, accessed 6/29/2009.
4. Helping Families Save Their Homes Act of 2009, P.L. 111-22, 5/20/2009.
5. Congressional Budget Office, “The Troubled Asset Relief Program: Report on Transactions Through June 17, 2009,” 6/2009, http://www.cbo.gov/ftpdocs/100xx/doc10056/TARP.pdf, accessed 6/29/2009.
6. Helping Families Save Their Homes Act of 2009, P.L. 111-22, 5/20/2009.
7. As of 6/30/2009, CPP repayments total $70.1 billion and AIFP loan repayments (Chrysler Financial) total $130.8 million.
9. Emergency Economic Stabilization Act of 2008, P.L. 110-343, 10/3/2008.
11. Treasury, “Factsheet on Capital Purchase Program,” 3/17/2009, http://www.financialstability.gov/roadtostability/CPPfactsheet.htm, accessed 6/8/2009.
12. Source for funds invested and funds repaid is: Treasury, Transactions Report, 7/2/2009, http://www.financialstability.gov/docs/transaction-reports/transactions-report_070209.pdf, accessed 7/8/2009. Source for projected funding total is: Treasury,
Office of Financial Stability, Chief of Compliance and CFO, SIGTARP interview, 3/30/2009.
13. Treasury, “Treasury White Paper: The Capital Assistance Program and Its Role in the Financial Stability Plan,” no date, http://www.treas.gov/press/releases/reports/tg40_capwhitepaper.pdf, accessed 6/8/2009.
14. Treasury, “Treasury White Paper: The Capital Assistance Program and Its Role in the Financial Stability Plan,” no date, http://www.treas.gov/press/releases/reports/tg40_capwhitepaper.pdf, accessed 6/8/2009.
15. Federal Reserve, “The Supervisory Capital Assessment Program: Overview of Results,” 5/7/2009, http://www.financialstability.gov/docs/SCAPresults.pdf, accessed 6/15/2009.
16. Treasury, “Programs,” 5/7/2009, http://www.financialstability.gov/roadtostability/programs.htm, accessed 6/8/2009.
17. The $40 billion Series D cumulative preferred shares were effectively converted to $41.6 billion Series D non-cumulative preferred without any cash outlay by Treasury.
19. Treasury, response to SIGTARP draft report, 7/9/2009.
20. Treasury, “Targeted Investment Program,” 3/26/2009, http://www.financialstability.gov/roadtostability/targetedinvestmentprogram.html, accessed 6/8/2009.
22. Treasury, Section 102 Report, 12/31/2008, http://www.treas.gov/press/releases/reports/0010208%20sect%20102.pdf, accessed 6/8/2009.
23. Treasury Press Release, “U.S. Government Finalizes Terms of Citi Guarantee Announced in November,” 1/16/2009, http://www.financialstability.gov/latest/hp1358.html, accessed 6/8/2009.
25. Treasury, SIGTARP meeting on Bank of America, 6/25/2009.
28. Federal Reserve Board, response to SIGTARP draft report, 7/9/2009.
29. This number was calculated by summing the March, April, May, and June TALF loan subscriptions. Federal Reserve Bank of New York, “Term Asset-Backed Securities Loan Facility,” no date, http://www.newyorkfed.org/markets/talf_operations.
html, accessed 6/15/2009.
30. Treasury, “Public-Private Investment Program,” 4/6/2009, http://www.financialstability.gov/roadtostability/publicprivatefund.html, accessed 6/30/2009.
31. FDIC Press Release, “FDIC Statement on the Status of the Legacy Loan Program,” 6/3/2009, http://www.fdic.gov/news/news/press/2009/pr09084.html, accessed 6/29/2009.
32. Treasury, “Public-Private Investment Program,” 4/6/2009, http://www.financialstability.gov/roadtostability/publicprivatefund.html, accessed 6/9/2009.
33. Treasury, “Unlocking Credit for Small Businesses Fact Sheet,” 3/17/2009, http://www.financialstability.gov/roadtostability/unlockingCreditforSmallBusinesses.html, accessed 6/10/2009.
34. Treasury, “Guidelines for Automotive Industry Financing Program,” no date, http://www.financialstability.gov/docs/AIFP/AIFP_guidelines.pdf, accessed 6/8/2009.
36. Treasury, “Auto Supplier Support Program: Stabilizing the Auto Industry at a Time of Crisis, no date, http://www.treas.gov/press/releases/docs/supplier_support_program_3_18.pdf, accessed 6/15/2009.
39. Treasury, Office of Financial Stability, Auto Team, GAO interview, 6/5/2009.
40. Treasury Press Release, “Relief for Responsible Homeowners One Step Closer Under New Treasury Guidelines,” 3/4/2009, http://www.financialstability.gov/latest/tg48.html, accessed 6/10/2009.
41. Treasury, “Making Home Affordable: Updated Detailed Program Description,” 3/4/2009, http://www.treas.gov/press/releases/reports/housing_fact_sheet.pdf, accessed 6/10/2009.
42. Treasury, “Making Home Affordable: Updated Detailed Program Description,” 3/4/2009, http://www.treas.gov/press/releases/reports/housing_fact_sheet.pdf, accessed 6/10/2009.
44. Treasury, “Interim Assistant Secretary for Financial Stability Neel Kashkari Review of the Financial Market Crisis and the Troubled Asset Relief Program,” 1/13/2009, www.treas.gov, accessed 3/16/2009.
45. Treasury, “Treasury Releases Capital Purchase Program Term Sheets for Mutual Holding Companies,” 4/7/2009, www.financialstability.gov/latest/tg-04072009.html, accessed 6/1/2009.
46. Treasury, “Treasury Releases Capital Purchase Program Term Sheets for Mutual Banks,” 4/14/2009, www.financialstability.gov/latest/tg88.html, accessed 6/5/2009.
47. Treasury, Tranche Report, 6/3/2009, www.financialstability.gov/docs/TrancheReports/7th_Tranche-Report-Appendix.pdf, accessed 6/5/2009.
50. Treasury, “Treasury Releases Capital Purchase Program Term Sheets for Mutual Banks,” 4/14/2009, www.financialstability.gov/latest/tg88.html, accessed 6/5/2009.
51. Treasury, “Remarks by Secretary Geithner before the Independent Community Bankers of America Annual Washington Policy Summit,” 5/13/2009, www.financialstability.gov/latest/tg127.html, accessed 6/1/2009.
52. Treasury, Transactions Report, 7/2/2009, http://www.financialstability.gov/docs/transactions-reports/transactions-report-0702.pdf, accessed 7/2/2009.
53. American Recovery and Reinvestment Act of 2009, P.L. 111-5, 2/17/2009.
54. Treasury, “The Treasury Capital Assistance Program and the Supervisory Capital Assessment Program,” 5/6/2009, http://www.financialstability.gov/latest/tg91.html, accessed 5/8/2009.
55. Federal Reserve, “Federal Reserve outlines criteria it will use to evaluate applications to redeem U.S. Treasury capital,” 6/1/2009, www.federalreserve.gov, accessed 6/2/2009.
58. Treasury, “Treasury Announces Warrant Repurchase and Disposition Process for the Capital Purchase Program,” 6/26/2009, http://www.financialstability.gov/latest/tg_06262009.html, accessed 6/26/2009.
59. Treasury, CPP Securities Purchase Agreements, various dates; www.financialstability.gov, accessed 7/4/2009.
61. Helping Families Save Their Homes Act of 2009, P.L.111-22, 5/20/2009.
62. Treasury, “Treasury Announces Warrant Repurchase and Disposition Process for the Capital Purchase Program,” 6/26/2009, www.financialstability.gov/latest/tg_06262009.html, accessed 6/26/2009.
68. Congressional Oversight Panel, “July Oversight Report: TARP Repayments, Including the Repurchase of Stock Warrants,” 7/10/2009, http://cop.senate.gov/documents/cop-071009-report.pdf, accessed 7/13/2009.
71. Congressional Oversight Panel, “July Oversight Report: TARP Repayments, Including the Repurchase of Stock Warrants,” 7/10/2009, http://cop.senate.gov/documents/cop-071009-report.pdf, accessed 7/13/2009.
76. This does not include the $60 million warrant repurchase by State Street Corporation as of the drafting of this report.
78. Treasury, Tranche Report, 6/3/2009, www.financialstability.gov/docs/TrancheReports/7th_Tranche-Report-Appendix.pdf, accessed 6/5/2009.
79. Treasury, “Treasury Releases First Monthly Bank Lending Survey,” 2/17/2009, www.treas.gov, accessed 3/19/2009.
81. Treasury, “Treasury Releases April Monthly Bank Lending Survey,” 6/15/2009, www.financialstability.gov/latest/06152009_banksurvey.html, accessed 6/16/2009.
82. Treasury, “Financial Stability Plan,” 2/10/2009, www.financialstability.gov/latest/tg21.html, accessed 6/5/2009.
83. Treasury, “Capital Assistance Program,” 3/3/2009, www.financialstability.gov/roadtostability/capitalassistance.html, accessed 6/5/2009.
84. Treasury, “Treasury White Paper: The Capital Assistance Program and Its Role in the Financial Stability Plan,” no date, www.treas.gov, accessed 3/25/2009.
85. Federal Reserve, “The Supervisory Capital Assessment Program: Overview of Results,” 5/7/2009, http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20090507a1.pdf, accessed 7/2/2009.
86. Treasury, “Statement from Treasury Secretary Tim Geithner Regarding the Treasury Capital Assistance Program and the Supervisory Capital Assessment Program,” 5/7/2009, www.fianncialstability.gov, accessed 5/7/2009.
87. Federal Reserve, “The Supervisory Capital Assessment Program: Design and Implementation,” 4/24/2009, http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20090424a1.pdf, 7/3/2009.
89. Treasury, Transactions Report, http://www.financialstability.gov/docs/transactions-reports/transactionreport-070209.pdf, accessed 7/8/2009.
90. Treasury, Stress Test Briefing, 5/8/2009.
91. Tier One Common is a regulatory standard while TCE is a commonly used market term; both terms refer to similar types of capital.
92. Federal Reserve, response to SIGTARP draft report, 7/10/2009.
94. Department of Labor, “The Employment Situation: May 2009,” 6/5/2009, www.bls.gov, accessed 6/30/2009.
97. Federal Reserve Press Release, “Banking organizations have submitted capital plans to bolster their capital,” 6/8/2009, www.federalreserve.gov/newsevents/press/bcreg/20090608b.htm, accessed 6/8/2009.
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103. Treasury Press Release, “Treasury to Invest in AIG Restructuring Under the Emergency Economic Stabilization Act,” 11/10/2008, www.financialstability.gov/latest/hp1261.html, accessed 6/9/2009.
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105. Treasury, “Securities Exchange Agreement dated as of April 17, 2009, between American International Group, Inc. and United States Department of the Treasury,” 4/17/2009, www.financialstability.gov/docs/agreements/Series.E.Securities.
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107. American International Group, Inc., 10-Q, “Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934,” 3/31/2009, www.sec.gov/Archives/edgar/data/5272/000095012309008272/y76976e10vq.htm, accessed
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6/15/2009.
110. Treasury, American International Group, Inc. “Term Sheet,” 3/2/2009, www.treas.gov/press/releases/reports/030209_aig_term_sheet.pdf, accessed 6/9/2009.
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114. Treasury, “Securities Purchase Agreement dated as of April 17, 2009, between American International Group, Inc. and United States Department of the Treasury,” 4/17/2009, www.financialstability.gov/docs/agreements/Series.F.Securities.
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115. Treasury, “Securities Purchase Agreement dated as of April 17, 2009 between American International Group, Inc. and United States Department of the Treasury,” 4/17/2009, www.financialstability.gov/docs/agreements/Series.F.Securities.
123. American International Group, Inc. Press Release, “AIG Positioning AIA and ALICO as Independent Operations; Federal Reserve Bank of New York to Own Preferred Interests in AIA and ALICO SPVs; Upon Closing, Debt Owed by AIG to
FRBNY To Be Reduced by $25 Billion,” 6/25/2009.
6/8/2009.
6/8/2009.
128. Treasury, “Treasury Releases Guidelines for Targeted Investment Program,” 1/2/2009, www.treas.gov, accessed 1/9/2009.
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131. Citigroup, “Citi Announces Public Share Exchange Launch, Finalizes Definitive Agreement with U.S. Government,” 6/10/2009, www.citigroup.com/citi/press/2009/090610a.htm, accessed 6/10/2009.
132. Treasury Press Release, “Treasury Announces Participation in Citigroup’s Exchange Offering,” 2/27/2009, http://www.financialstability.gov/latest/tg41.html, accessed 7/21/2009.
134. Citigroup, 8-K, 6/9/2009, http://sec.gov/Archives/edgar/data/831001/000095010309001394/dp13784_8k.htm, accessed 6/10/2009.
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145. Bank of America Press Release “Stress Test: Bank of America would need $33.9 Billion more in Tier 1 common,” 5/7/2009, http://investor.bankofamerica.com/phoenix.zhtml?c=71595&p=irol-newsArticle&ID=1286200&highlight=, accessed
7/14/2009.
146. Citigroup, “Securities Purchase Agreement,” 12/31/2008.
147. Citigroup, “What Citi is Doing to Expand the Flow of Credit, Support Homeowners and Help the U.S. Economy, TARP Progress Report for First Quarter 2009,” 5/12/2009, www.citigroup.com, accessed 6/1/2009.
152. Bank of America, “Quarterly Certifications as to Reports on Internal Controls,” 5/11/2009, received from SIGTARP 7/1/2009.
155. Federal Reserve, response to SIGTARP draft report, 7/9/2009.
156. Federal Reserve Press Release, “Expansion of TALF,” 5/1/2009, www.federalreserve.gov/newsevents/press/monetary/20090501a.htm, accessed 6/1/2009.
157. FRBNY, “Term Asset-Backed Securities Loan Facility: Terms and Conditions,” 3/19/2009, www.newyorkfed.org, accessed 3/27/2009.
158. CPP, TALF, and PPIP: Treasury, Office of Financial Stability, Chief of Compliance and CFO, SIGTARP interview, 3/30/2009.
159. Lanman, Scott, Bloomberg, “Fed Gets No Requests for TALF Loans to Purchase CMBS,” www.bloomberg.com/apps/news?pid=newsarchive&sid=ajo5OhBgsgz8, 6/16/2009.
161. Federal Reserve Press Release, “Expansion of TALF,” 5/19/2009, www.federalreserve.gov/monetarypolicy/20090519b.htm, accessed 6/1/2009.
163. For newly issued CMBS is: FRBNY, “Changes from June 23 CMBS Terms and Conditions,” 7/2/2009, http://www.newyorkfed.org/markets/Terms_Blackline_090702.pdf, accessed 7/2/2009. For legacy CMBS the source is: FRBNY, “Changes
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407. National Credit Union Administration Media Advisory, “Fryzel Announces Mortgage Relief Program for Consumers,” 11/18/2008, www.ncua.gov/news/press_releases/2008/MA08-1118a.htm, accessed 6/29/2009.
408. National Credit Union Administration, “Term Sheet for Credit Union System Investment Program,” www.ncua.gov/Resources/CLF/CU%20SIP%20Notes%20Term%20Sheet%2012%2009%202008.pdf, accessed 6/28/2009.
409. Government National Mortgage Association, “About GNMA,” no date, www.ginniemae.gov/about/about.asp?section=about, accessed 6/28/2009.
410. Government National Mortgage Association, “Report to Congress, Fiscal Year 2008,” 11/7/2008, www.ginniemae.gov/reporttocongress, accessed 6/28/2009.
411. Federal Housing Administration, “Message from the Chief Financial Officer,” 11/17/2008, p. 323, fhasecure.gov/offices/cfo/reports/section3.pdf, accessed 6/28/2009.
412. Department of Veterans Affairs, “About VA Home Mortgage,” no date, www.homeloans.va.gov, accessed 6/28/2009.
413. White House, “Budget FY 2009 – Department of Veterans Affairs,” www.whitehouse.gov/omb/budget/fy2009/veterans.html, accessed 6/28/2009.
419. GAO-09-504, “Troubled Asset Relief Program: March 2009 Status of Efforts to Address Transparency and Accountability Issues,” 3/31/2009.
420. Congressional Budget Office Press Release, 9/28/2008, www.cbo.gov, accessed 1/15/2009.
423. White House Press Release, “President Obama Announces More Key Treasury Appointments,” 4/17/2009, www.whitehouse.gov/the_press_office/President-Obama-Announces-More-Key-Treasury-Appointments, accessed 6/4/2009.
424. White House Press Release, “President Obama Announces More Key Treasury Appointments,” 4/17/2009, www.whitehouse.gov/the_press_office/President-Obama-Announces-More-Key-Treasury-Appointments, accessed 6/4/2009.
425. Treasury Press Release, “Interim Final Rule on TARP Standards for Compensation and Corporate Governance,” 6/10/2009, www.ustreas.gov/press/releases/tg165.htm, accessed 6/24/2009.
426. Treasury Press Release, “Interim Final Rule on TARP Standards for Compensation and Corporate Governance,” 6/10/2009, www.ustreas.gov/press/releases/tg165.htm, accessed 6/24/2009.
427. Treasury Press Release, 4/22/2009, www.financialstability.gov/latest/tg100.html, accessed 6/4/2009.
432. OFS, OFS Asset Manager briefing report, 7/6/2009, OFS conference call.
436. OFS, response to SIGTARP data call, 6/30/2009.
437. OFS, OFS Asset Manager Briefing, 7/6/2009, OFS conference call 7/6/2009.
438. OFS, response to SIGTARP data call, 6/30/2009.
439. OFS, conference call 7/6/2009.
440. OFS, OFS Asset Manager Briefing, 7/6/2009, OFS conference call.
446. Treasury Press Release, 10/6/2008, www.treasury.gov, accessed 1/15/2009.
447. TARP Conflicts of Interest, Interim Rule, Billing Code 4810-25-P, 1/21/2009.
448. GAO-09-161, “Troubled Asset Relief Program: Additional Actions Needed to Better Ensure Integrity, Accountability, and Transparency,” 12/2/2008.
449. GAO-09-161, “Troubled Asset Relief Program: Additional Actions Needed to Better Ensure Integrity, Accountability, and Transparency,” 12/2/2008.
450. Treasury, “Summary Response to Recommendations in December 2008 GAO Report,” 1/22/2009.
Sources for Figure 2.1: Treasury, Office of Financial Stability, Chief of Compliance and CFO, SIGTARP interview, 3/30/2009; Treasury, Transactions Report, 7/2/2009, http://www.financialstability.gov/
docs/transaction-reports/transactions-report_070209.pdf, accessed 7/6/2009; Treasury, “Auto Supplier Support Program: Stabilizing the Auto Industry in a Time of Crisis,” 3/19/2009, http://www.treas.
gov/press/releases/docs/supplier_support_program_3_18.pdf, accessed 3/19/2009; Treasury, “Unlocking Credit for Small Businesses Fact Sheet,” 3/17/2009, http://www.financialstability.gov/roadto-
stability/unlockingCreditforSmallBusinesses.html, accessed 6/10/2009; Treasury, “Treasury, Federal Reserve, and FDIC Provide Assistance to Bank of America,” 1/16/2009, http://www.treas.gov/press/
releases/hp1356.htm, accessed 1/16/2009; Treasury Press Release, “U.S. Government Finalizes Terms of Citi Guarantee Announced in November,” 1/16/2009, http://www.financialstability.gov/latest/
hp1358.html, accessed 6/8/2009; Treasury, “Financial Stability Plan Fact Sheet,” 2/10/2009, http://www.financialstability.gov/docs/fact-sheet.pdf, accessed 6/8/2009; Treasury, “Making Home Affordable:
Updated Detailed Program Description,” 3/4/2009, http://www.treas.gov/press/releases/reports/housing_fact_sheet.pdf, accessed 6/10/2009; Treasury, “Public-Private Investment Program,” 4/6/2009,
http://www.financialstability.gov/roadtostability/publicprivatefund.html, accessed 6/9/2009.
APPENDICES
A. Glossary* –
B. Acronyms and Abbreviations* –
C. Reporting Requirements 198
D. Transaction Detail 202
E. Public Announcement of Audits* –
F. Key Oversight Reports and Testimonies* –
G. Correspondence Regarding SIGTARP Recommendations 222
H. Organizational Chart 257
*Visit www.sigtarp.gov to view Appendix A: Glossary, Appendix B: Acronyms and Abbreviations,

Appendix E: Public Announcement of Audits, Appendix F: Key Oversight Reports and Testimonies,
and for further reference material.
198 APPENDIX C I CROSS-REFERENCE TO REPORTING REQUIREMENTS I JULY 21, 2009
CROSS-REFERENCE TO REPORTING REQUIREMENTS

This appendix provides Treasury’s responses to data call questions regarding the reporting requirements of the
Special Inspector General for the Troubled Asset Relief Program outlined in EESA Section 121, as well as a
cross-reference to related data presented in this report. Italics style indicates relevant narrative taken verbatim
from source documents.
EESA EESA Reporting SIGTARP

# Section Requirement Treasury Response to SIGTARP Data Call Report Section
1 Section A description of Treasury posts several documents on its public website that are responsive to this ques- Section 2:
121(c)(A) the categories of tion, available at http://www.financialstability.gov/latest/reportsanddocs.html. Specifically, “TARP Overview”
troubled assets tranche reports and reports required under section 105(a) of the Emergency Economic
purchased or Stabilization Act of 2008 (EESA) describe, at a high level, Treasury’s programs and troubled Appendix D:
otherwise procured asset purchases. The transaction reports describe these purchases in detail, including “Transaction
by the Secretary. the type of asset purchased, the identity of the institution selling the asset, and the price Detail”
Treasury paid for the asset. Other sources for this information are the determinations signed
by the Secretary of the Treasury, designating certain financial instruments as “troubled as-
sets” under section 3(9)(B) of EESA. Troubled asset determinations signed by the Treasury
Secretary since March 30, 2009 are provided in response to [#3].
Below are program descriptions from Treasury’s FinancialStability.gov website, as of

6/30/2009:
CPP: Treasury created the Capital Purchase Program (CPP) in October 2008 to stabilize the
financial system by providing capital to viable financial institutions of all sizes throughout the
nation. With a strengthened capital base, financial institutions have an increased capacity to
lend to U.S. businesses and consumers and to support the U.S. economy.
CAP: The purpose of the CAP is to restore confidence throughout the financial system that
the nation’s largest banking institutions have a sufficient capital cushion against larger than
expected future losses, should they occur due to a more severe economic environment, and
to support lending to creditworthy borrowers.
SSFI: Systemically Significant Failing Institution Program (SSFI) was established to provide
stability and prevent disruptions to financial markets from the failure of institutions that are
critical to the functioning of the nation’s financial system.
AGP: The Asset Guarantee Program (AGP) provides government assurances for assets held
by financial institutions that are critical to the functioning of the nation’s financial system,
which face a risk of losing the critical confidence that is needed for them to continue to lend
to other banks.
TIP: Treasury created the Targeted Investment Program (TIP) to stabilize the financial system
by making investments in institutions that are critical to the functioning of the financial sys-
tem. This program focuses on the complex relationships and reliance of institutions within
the financial system. Investments made through the TIP seek to avoid significant market
disruptions resulting from the deterioration of one financial institution that can threaten other
financial institutions and impair broader financial markets and pose a threat to the overall
economy.
TALF: The TALF is designed to increase credit availability and support economic activity by
facilitating renewed issuance of consumer and small business ABS at more normal interest
rate spreads… Under the TALF, the Federal Reserve Bank of New York (FRBNY) will provide
non-recourse funding to any eligible borrower owning eligible collateral... The U.S. Treasury’s
Troubled Assets Relief Program (TARP) will purchase $20 billion of subordinated debt in
an SPV created by the FRBNY. The SPV will purchase and manage any assets received by
the FRBNY in connection with any TALF loans. Residual returns from the SPV will be shared
between the FRBNY and the U.S. Treasury.
CROSS-REFERENCE TO REPORTING REQUIREMENTS I APPENDIX C I JULY 21, 2009 199

PPIP: To address the challenge of legacy assets, Treasury – in conjunction with the Federal
Deposit Insurance Corporation and the Federal Reserve – has announced the Public-Private
Investment Program as part of its efforts to repair balance sheets throughout our financial
system and ensure that credit is available to the households and businesses, large and
small, that will help drive us toward recovery... Using $75 to $100 billion in TARP capital
and capital from private investors, the Public-Private Investment Program will generate $500
billion in purchasing power to buy legacy assets – with the potential to expand to $1 trillion
over time.
UCSB: The Treasury Department will begin making direct purchases of securities backed by
SBA loans to get the credit market moving again, and it will stand ready to purchase new
securities to ensure that community banks and credit unions feel confident in extending new
loans to local businesses.
AIFP: The objective of the Automotive Industry Financing Program (AIFP) is to prevent a sig-
nificant disruption of the American automotive industry, which would pose a systemic risk to
financial market stability and have a negative effect on the economy of the United States...
Treasury has issued loans to the automobile industry and received warrants, which are a
form of equity in a company, in return. Treasury’s loans to the automobile industry are work-
ing to stabilize the financial system by addressing these companies’ short term needs, while
providing them enough time to craft restructuring plans that will help them achieve viability.
ASSP: [ASSP] will provide up to $5 billion in financing, giving suppliers the confidence they
need to continue shipping parts, pay their employees and continue their operations.
AWCP: The Treasury Department announced an innovative new program to give consumers
who are considering new car purchases the confidence that even in this difficult economic
period, their warrantees will be honored. This program is part of the Administration’s
broader program to stabilize the auto industry and stand behind a restructuring effort that
will result in stronger, more competitive and viable American car companies.
HAMP (a program under MHA): The Home Affordable Modification program has a simple
goal: reduce the amount homeowners owe per month to sustainable levels to stabilize
communities. This program will bring together lenders, investors, servicers, borrowers,
and the government, so that all stakeholders share in the cost of ensuring that responsible
homeowners can afford their monthly mortgage payments – helping to reach up to 3 to 4
million at-risk borrowers in all segments of the mortgage market, reducing foreclosures, and
helping to avoid further downward pressures on overall home prices.
2 Section A listing of the Treasury posts transaction reports for all the troubled asset purchases on its public website Appendix D:
121(c)(B) troubled assets within two business days after each transaction. Information on all transactions is avail- “Transaction
purchased in each able at http://www.financialstability.gov/impact/transactions.htm. Since the publication of Detail”
such category the SIGTARP Report in April, Treasury has continued to invest funds in financial institutions
described under across the United States through the Capital Purchase Program (CPP), and as of May 31,
[Section 121(c)(A)]. 2009 more than $15 billion has been allocated towards the Making Home Affordable Pro-
gram. Guidelines for all TARP programs, which explain each program’s scope and purpose
are also posted on Treasury’s website at http://www.financialstability.gov/roadtostability/
programs.htm. Additional information about these programs and related purchases is avail-
able in tranche reports and Section 105(a) reports, which are posted on Treasury’s website.
Information is also available in the troubled asset determinations attached as part of the
response to [#3].
3 Section An explanation of Pursuant to Section (3)(9)(B) of EESA, the Secretary of the Treasury periodically designates Section 2:
121(c)(C) the reasons the financial instruments as “troubled assets” and submits written determinations to appropriate “TARP Overview”
Secretary deemed committees of Congress. Attached below are all troubled asset determinations signed by
it necessary to pur- the Secretary of the Treasury since Treasury responded to SIGTARP’s previous data call on
chase each such April 8, 2009. [Treasury provided determinations for HAMP, AIFP, and SSFI (AIG)]. Additional
troubled asset. information on the TARP programs associated with these “troubled assets” , including each
program’s scope and purpose, can be found online at http://www.financialstability.gov/
roadtostability/programs.htm.
4 Section A listing of each See #2 above See #2

121(c)(D) financial institution
that such troubled
assets were pur-
chased from.
200 APPENDIX C I CROSS-REFERENCE TO REPORTING REQUIREMENTS I JULY 21, 2009

5 Section A listing of and As of June 30, 2009, four financial institutions have been selected as financial agents to pro- Section 4:
121(c)(E) detailed biographi- vide asset management services to the Treasury. EARNEST Partners was engaged on March “TARP Operations
cal information on 16, 2009 to provide asset management services for the Small Business Administration and Administra-
each person or (SBA) related loans and securities. Detailed biographical information on EARNEST Partners tion”
entity hired to man- was provided [to SIGTARP for incorporation in its July 2009 Quarterly Report]... As of June
age such troubled 30, 2009, the Treasury and EARNEST Partners had not acquired any assets under the Small Appendix C:
assets. Business Support Program. Therefore, there are no assets assigned to the asset manager. “Reporting
Requirements”
On April 21, 2009, the Treasury selected AllianceBernstein L.P., FSI Group, LLC, and Pied- of SIGTARP’s
mont Investment Advisors, LLC as financial agents to provide asset management services April 21, 2009
for the portfolio of equity securities, warrants and senior subordinated securities issued to Quarterly Report
the Treasury by financial institutions. to Congress
AllianceBernstein is a leading global investment management firm that offers high-quality

research and diversified investment services to institutional clients, individuals and private
clients in major markets around the world. The firm, headquartered in New York City,
employs more than 500 investment professionals with expertise in growth equities, value
equities, fixed-income securities, blend strategies and alternative investments.
FSI Group LLC operates a multi-strategy investment platform focused on opportunities in the
financial services sector. The firm, based in Cincinnati, specializes in financing and investing
in banks, thrifts, insurance companies, REITs, real estate operating companies and other
financial services firms.
Piedmont Investment Advisors is a professional money management firm specializing in core

equity and fixed-income management. The firm was founded in August 2000 and is based in
Durham, North Carolina.
The three asset management firms discussed above are collectively assigned to manage
the assets issued to the Treasury under the CPP, with participating financial institution as-
signed a single lead asset manager that is the Treasury’s primary representative with that
institution.
6 Section A current estimate This information is contained in our transactions reports, which are posted on Treasury’s Obligations by
121(c)(F) of the total amount website at http://www.financialstability.gov/latest/reportsanddocs.html. The most recent Program provided
of troubled assets TARP transactions report (as of June 30, 2009) [was provided to SIGTARP]. The transactions in Table C.1 below
purchased pursu- report captures the total obligation under each TARP program.
ant to any program Section 2:
established under “TARP Overview”
section 101, the
amount of troubled Appendix D:
assets on the “Transaction
books of the Trea- Detail”
sury, the amount
of troubled assets
sold, and the profit
and loss incurred
on each sale or
disposition of each
such troubled
asset.
7 Section A listing of the On January 16, 2009, TARP closed on the guarantee transaction with Citigroup, as an- Section 2:
121(c)(G) insurance con- nounced in a joint statement by the Treasury, Federal Reserve and FDIC on November 23, “TARP Overview”
tracts issued under 2008. No other insurance contracts have been issued as of June 30, 2009.
section 102.
CROSS-REFERENCE TO REPORTING REQUIREMENTS I APPENDIX C I JULY 21, 2009 201

8 Section A detailed The extent of Treasury’s appropriation for TARP is described in section 118 of EESA. Obligations by
121(f) statement of Treasury’s authority to purchase troubled assets is described in section 115 of EESA. The Program provided
all purchases, amount of troubled assets purchased, by institution and in the aggregate, is listed on Trea- in Table C.1 below
obligations, expen- sury’s transaction reports, which are published on Treasury’s website. Treasury also reports
ditures, and rev- the apportioned amount of TARP funds by program category in the FSP Budget report Section 2:
enues associated provided [to SIGTARP]. “TARP Overview”
with any program
established by the Section 4:
Secretary of the “TARP Operations
Treasury under and Administra-
sections 101 and tion”
102.
Appendix D:
“Transaction
Detail”
Note: TARP participation in TALF has increased to $80 billion according to Treasury Office of Financial Stability, Chief of Compliance and CFO, SIGTARP interview, 3/30/2009.
Sources: Program descriptions: Treasury, “Programs” webpage, 5/7/2009 (“Updated” date), http://www.financialstability.gov/roadtostability/programs.htm, accessed 6/30/2009; ASSP: “Treasury
Announces Auto Suppliers Support Program,” 3/19/2009, http://www.financialstability.gov/latest/auto3_18.html, accessed 6/30/2009; AWCP, “Obama Administration’s New Warrantee Commitment
Program,” no date, http://www.financialstability.gov/docs/WarranteeCommitmentProgram.pdf, accessed 6/30/2009; TALF: Federal Reserve, “Term Asset-Backed Securities Loan Facility (TALF)
Frequently Asked Questions,” no date, http://www.federalreserve.gov/newsevents/press/monetary/monetary20090303a2.pdf, accessed 6/30/2009; Treasury, responses to SIGTARP data call,
6/30/2009 and 7/8/2009.
TABLE C.1
TOTAL AMOUNT OF TROUBLED ASSETS PURCHASED AND HELD ON TREASURY’S BOOKS, AS OF 6/30/2009 ($ BILLIONS)
Obligationsa Expendedb On Treasury’s Booksc
Capital Purchase Program (“CPP”) $203.2 $203.2 $203.2

Systemically Significant Failing Institutions (“SSFI”) 69.8 41.2 41.2
Targeted Investment Program (“TIP”) 40.0 40.0 40.0

Automotive Industry Financing Program (“AIFP”) d
85.0 54.3 54.3
Asset Guarantee Program (“AGP”)e 5.0 — —
Term Asset-Backed Securities Loan Facility (“TALF”) f
20.0 0.1 0.1
Making Homes Affordable (MHA) 18.0 — —
Total $441.0 $338.7 $338.7
Notes:
Numbers affected by rounding.
a
According to Treasury, “From a budgetary perspective, what Treasury has committed to spend (e.g. signed agreements with TARP recipients).” Based on “Face Value Obligations” from Treasury source docu-
ment (TARP/Financial Stability Plan Tracking Report).
b
According to Treasury, “Represents TARP cash that has left the Treasury.” Based on “Face Value Disbursed/Outlays” from Treasury source document (TARP/Financial Stability Plan Tracking Report).
c
According to Treasury, “All assets are currently carried at par value.”
d
According to Treasury, “The face value obligations exceed the expected program usage amount for the AIFP because the final amount expected to be spent out of the Chrysler DIP and Exit financing is
expected to be lower than originally obligated.”
e
According to Treasury, “Reflects negative subsidy of $750 million off of the total $301 billion Citigroup guarantee, not just the $5 billion portion guaranteed by Treasury via the TARP (Breakdown of $301B:
$5B from the UST, $40B from Citi, $5B from the FDIC and $251B from the Federal Reserve).”
f
According to Treasury, “Term Asset Backed Securities Loan Facility (TALF-1): Up to $20B may be disbursed as credit protection for the $200B Federal Reserve Loan Facility. TARP is temporarily carrying this
at a 100 percent subsidy. Initial funding of $100M on 3/25/09.”

CPP TRANSACTION DETAIL, AS OF 6/30/2009
202
Seller Purchase Details Capital Repayment Details Final Disposition Warrant and Market Data for Publicly Traded Companies
Number of Current Amt. “In the

Capital Capital Remaining Final Disposition Final Market Warrants Number of Money” / Dividend
Investment Investment Repayment Repayment Capital Disposition Investment Disposition Current Capitalization Strike Originally Outstanding “Out of the Payments to
Date Name of Institution Description Amount Date Amount6 Amount Date Description Proceeds Stock Price (in millions) Pricea Issued Warrants Money” e Treasury
10/28/08 Bank of America Corporation (Charlotte, NC) Pref. Stock w/ Warr. $15,000,000,000 $13.20 $104,544 $30.79 73,075,674 73,075,674 $(17.59) $410,416,667
10/28/08 Bank of New York Mellon Corporation (New Pref. Stock w/ Warr. $3,000,000,000 6/17/2009 4 $3,000,000,000 $0 $29.31 $35,039 $31.00 14,516,129 14,516,129 $(1.69) $95,416,667
York, NY)
10/28/08 Citigroup Inc. (New York, NY)11, 12 Pref. Stock w/ Warr. $25,000,000,000 $2.97 $16,315 $17.85 210,084,034 210,084,034 $(14.88) $684,027,778
10/28/08 JPMorgan Chase & Co. (New York, NY) Pref. Stock w/ Warr. $25,000,000,000 6/17/2009 4 $25,000,000,000 $0 $34.11 $133,063 $42.42 88,401,697 88,401,697 $(8.31) $795,138,889
10/28/08 Morgan Stanley (New York, NY) Pref. Stock w/ Warr. $10,000,000,000 6/17/2009 4 $10,000,000,000 $0 $28.51 $38,537 $22.99 65,245,759 65,245,759 $5.52 $318,055,555
10/28/08 State Street Corporation (Boston, MA) Pref. Stock w/ Warr. $2,000,000,000 6/17/2009 5 $2,000,000,000 $0 $47.20 $22,944 $53.80 5,576,208 2,788,104 $(6.60) $63,611,111
10/28/08 The Goldman Sachs Group, Inc. (New Pref. Stock w/ Warr. $10,000,000,000 6/17/2009 4 $10,000,000,000 $0 $147.44 $75,339 $122.90 12,205,045 12,205,045 $24.54 $318,055,555
York, NY)
10/28/08 Wells Fargo & Company (San Francisco, CA) Pref. Stock w/ Warr. $25,000,000,000 $24.26 $114,141 $34.01 110,261,688 110,261,688 $(9.75) $684,027,778
11/14/08 1st FS Corporation (Hendersonville, NC) Pref. Stock w/ Warr. $16,369,000 $4.99 $25 $8.59 276,815 276,815 $(3.60) $411,499
11/14/08 Bank of Commerce Holdings (Redding, CA) Pref. Stock w/ Warr. $17,000,000 $5.70 $50 $6.29 405,405 405,405 $(0.59) $427,361
11/14/08 BB&T Corp. (Winston-Salem, NC) Pref. Stock w/ Warr. $3,133,640,000 6/17/2009 4 $3,133,640,000 $0 $21.98 $13,971 $33.81 13,902,573 13,902,573 $(11.83) $92,703,517
11/14/08 Broadway Financial Corporation (Los Pref. Stock w/ Warr. $9,000,000 $6.25 $11 $7.37 183,175 183,175 $(1.12) $226,250
Angeles, CA)
APPENDIX D I TRANSACTION DETAIL I JULY 21, 2009
4
11/14/08 Capital One Financial Corporation (McLean, VA) Pref. Stock w/ Warr. $3,555,199,000 6/17/2009 $3,555,199,000 $0 $21.88 $9,882 $42.13 12,657,960 12,657,960 $(20.25) $105,174,638
11/14/08 Comerica Inc. (Dallas, TX) Pref. Stock w/ Warr. $2,250,000,000 $21.15 $3,196 $29.40 11,479,592 11,479,592 $(8.25) $56,562,500
11/14/08 First Horizon National Corporation (Memphis, TN) Pref. Stock w/ Warr. $866,540,000 $12.00 $2,579 $9.60 12,743,235 13,323,473 $2.40 $21,783,853
11/14/08 Huntington Bancshares (Columbus, OH) Pref. Stock w/ Warr. $1,398,071,000 $4.18 $2,272 $8.90 23,562,994 23,562,994 $(4.72) $35,145,952
11/14/08 KeyCorp (Cleveland, OH) Pref. Stock w/ Warr. $2,500,000,000 $5.24 $2,633 $10.64 35,244,361 35,244,361 $(5.40) $62,847,222
11/14/08 Marshall & Ilsley Corporation (Milwaukee, WI) Pref. Stock w/ Warr. $1,715,000,000 $4.80 $1,693 $18.62 13,815,789 13,815,789 $(13.82) $43,113,194
11/14/08 Northern Trust Corporation (Chicago, IL) Pref. Stock w/ Warr. $1,576,000,000 6/17/2009 4 $1,576,000,000 $0 $53.68 $12,814 $61.81 3,824,624 3,824,624 $(8.13) $46,623,333
11/14/08 Provident Bancshares Corp. (Baltimore, MD) Pref. Stock w/ Warr. $151,500,000 NA d NA d $9.57 2,374,608 2,374,608 NA $3,808,542
11/14/08 Regions Financial Corp. (Birmingham, AL) Pref. Stock w/ Warr. $3,500,000,000 $4.04 $4,667 $10.88 48,253,677 48,253,677 $(6.84) $87,986,111
11/14/08 SunTrust Banks, Inc. (Atlanta, GA) Pref. Stock w/ Warr. $3,500,000,000 $16.45 $7,644 $44.15 11,891,280 11,891,280 $(27.70) $133,506,944
11/14/08 TCF Financial Corporation (Wayzata, MN) Pref. Stock w/ Warr. $361,172,000 4/22/2009 4 $361,172,000 $0 $13.37 $1,713 $16.93 3,199,988 3,199,988 $(3.56) $7,925,719
11/14/08 U.S. Bancorp (Minneapolis, MN) Pref. Stock w/ Warr. $6,599,000,000 6/17/2009 4 $6,599,000,000 $0 $17.92 $34,005 $30.29 32,679,102 32,679,102 $(12.37) $195,220,417
11/14/08 UCBH Holdings, Inc. (San Francisco, CA) Pref. Stock w/ Warr. $298,737,000 $1.26 $152 $5.71 7,847,732 7,847,732 $(4.45) $7,509,920
11/14/08 Umpqua Holdings Corp. (Portland, OR) Pref. Stock w/ Warr. $214,181,000 $7.76 $467 $14.46 2,221,795 2,221,795 $(6.70) $5,384,272
11/14/08 Valley National Bancorp (Wayne, NJ) Pref. Stock w/ Warr. $300,000,000 6/3/2009 4 $75,000,000 $225,000,000 $11.70 $1,659 $18.66 2,297,090 2,411,945 $(6.96) $7,729,167
11/14/08 Washington Federal Inc. (Seattle, WA) Pref. Stock w/ Warr. $200,000,000 5/27/2009 4 $200,000,000 $0 $13.00 $1,145 $17.57 1,707,456 1,707,456 $(4.57) $5,361,111
11/14/08 Zions Bancorporation (Salt Lake City, UT) Pref. Stock w/ Warr. $1,400,000,000 $11.56 $1,333 $36.27 5,789,909 5,789,909 $(24.71) $35,194,444
11/21/08 Ameris Bancorp (Moultrie, GA) Pref. Stock w/ Warr. $52,000,000 $6.32 $86 $11.48 679,443 679,443 $(5.16) $1,256,667
11/21/08 Associated Banc-Corp (Green Bay, WI) Pref. Stock w/ Warr. $525,000,000 $12.50 $1,598 $19.77 3,983,308 3,983,308 $(7.27) $12,687,500
11/21/08 Banner Corporation (Walla Walla, WA) Pref. Stock w/ Warr. $124,000,000 $3.82 $67 $10.89 1,707,989 1,707,989 $(7.07) $2,996,667
11/21/08 Boston Private Financial Holdings, Inc. Pref. Stock w/ Warr. $154,000,000 $4.48 $304 $8.00 2,887,500 2,887,500 $(3.52) $3,721,667
(Boston, MA)
11/21/08 Cascade Financial Corporation (Everett, WA) Pref. Stock w/ Warr. $38,970,000 $2.16 $26 $6.77 863,442 863,442 $(4.61) $941,775
11/21/08 Centerstate Banks of Florida Inc. (Davenport, FL) Pref. Stock w/ Warr. $27,875,000 $7.42 $93 $16.67 250,825 250,825 $(9.25) $673,646
11/21/08 City National Corporation (Beverly Hills, CA) Pref. Stock w/ Warr. $400,000,000 $36.83 $1,880 $53.16 1,128,668 1,128,668 $(16.33) $9,666,667
11/21/08 Columbia Banking System, Inc. (Tacoma, WA) Pref. Stock w/ Warr. $76,898,000 $10.23 $187 $14.49 796,046 796,046 $(4.26) $1,858,368
11/21/08 First Community Bankshares Inc. (Bluefield, VA) Pref. Stock w/ Warr. $41,500,000 $12.84 $208 $35.26 176,546 176,546 $(22.42) $1,002,917
11/21/08 First Community Corporation (Lexington, SC) Pref. Stock w/ Warr. $11,350,000 $6.90 $22 $8.69 195,915 195,915 $(1.79) $274,292
11/21/08 First Niagara Financial Group (Lockport, NY) Pref. Stock w/ Warr. $184,011,000 5/27/2009 5 $184,011,000 $0 6/24/09 Warrants $2,700,000 $11.42 $1,710 $14.48 1,906,191 0 $(3.06) $4,753,618
11/21/08 First PacTrust Bancorp, Inc. (Chula Vista, CA) Pref. Stock w/ Warr. $19,300,000 $6.86 $29 $10.31 280,795 280,795 $(3.45) $466,417
11/21/08 Heritage Commerce Corp. (San Jose, CA) Pref. Stock w/ Warr. $40,000,000 $3.73 $44 $12.96 462,963 462,963 $(9.23) $966,667

11/21/08 Heritage Financial Corporation (Olympia, WA) Pref. Stock w/ Warr. $24,000,000 $11.56 $78 $13.04 276,074 276,074 $(1.48) $580,000
11/21/08 HF Financial Corp. (Sioux Falls, SD) Pref. Stock w/ Warr. $25,000,000 6/3/2009 4 $25,000,000 $0 6/30/09 Warrants $650,000 $11.82 $48 $12.40 302,419 0 $(0.58) $666,667
11/21/08 Nara Bancorp, Inc. (Los Angeles, CA) Pref. Stock w/ Warr. $67,000,000 $5.18 $136 $9.64 1,042,531 1,042,531 $(4.46) $1,619,167
11/21/08 Pacific Capital Bancorp (Santa Barbara, CA) Pref. Stock w/ Warr. $180,634,000 $2.14 $100 $17.92 1,512,003 1,512,003 $(15.78) $2,107,397
11/21/08 Porter Bancorp Inc. (Louisville, KY) Pref. Stock w/ Warr. $35,000,000 $15.15 $148 $17.51 299,829 299,829 $(2.36) $845,833
11/21/08 Severn Bancorp, Inc. (Annapolis, MD) Pref. Stock w/ Warr. $23,393,000 $3.10 $31 $6.30 556,976 556,976 $(3.20) $565,331
11/21/08 Taylor Capital Group (Rosemont, IL) Pref. Stock w/ Warr. $104,823,000 $6.85 $76 $10.75 1,462,647 1,462,647 $(3.90) $2,533,223
11/21/08 Trustmark Corporation (Jackson, MS) Pref. Stock w/ Warr. $215,000,000 $19.32 $1,109 $19.57 1,647,931 1,647,931 $(0.25) $5,195,833
11/21/08 Webster Financial Corporation (Waterbury, Pref. Stock w/ Warr. $400,000,000 $8.05 $425 $18.28 3,282,276 3,282,276 $(10.23) $9,666,667
CT)
11/21/08 Western Alliance Bancorporation (Las Pref. Stock w/ Warr. $140,000,000 $6.84 $466 $13.34 1,574,213 1,574,213 $(6.50) $3,383,333
Vegas, NV)
4
12/5/08 Bank of Marin Bancorp (Novato, CA) Pref. Stock w/ Warr. $28,000,000 3/31/2009 $28,000,000 $0 $26.95 $139 $27.23 154,242 154,242 $(0.28) $451,111
12/5/08 Bank of North Carolina (Thomasville, NC) Pref. Stock w/ Warr. $31,260,000 $8.00 $59 $8.63 543,337 543,337 $(0.63) $694,667
12/5/08 Blue Valley Ban Corp (Overland Park, KS) Pref. Stock w/ Warr. $21,750,000 $8.20 $23 $29.37 111,083 111,083 $(21.17) $211,458
12/5/08 Cathay General Bancorp (Los Angeles, CA) Pref. Stock w/ Warr. $258,000,000 $9.51 $471 $20.96 1,846,374 1,846,374 $(11.45) $5,733,333
12/5/08 Central Bancorp, Inc. (Somerville, MA) Pref. Stock w/ Warr. $10,000,000 $8.00 $13 $6.39 234,742 234,742 $1.61 $222,222
12/5/08 Central Federal Corporation (Fairlawn, OH) Pref. Stock w/ Warr. $7,225,000 $2.92 $12 $3.22 336,568 336,568 $(0.30) $160,556
12/5/08 Coastal Banking Company, Inc. (Fernandina Pref. Stock w/ Warr. $9,950,000 $3.55 $9 $7.26 205,579 205,579 $(3.71) $221,111
Beach, FL)
12/5/08 CVB Financial Corp (Ontario, CA) Pref. Stock w/ Warr. $130,000,000 $5.97 $497 $11.68 1,669,521 1,669,521 $(5.71) $2,888,889
12/5/08 Eagle Bancorp, Inc. (Bethesda, MD) Pref. Stock w/ Warr. $38,235,000 $8.77 $112 $7.44 770,867 770,867 $1.33 $849,667
12/5/08 East West Bancorp (Pasadena, CA) Pref. Stock w/ Warr. $306,546,000 $6.49 $416 $15.15 3,035,109 3,035,109 $(8.66) $6,812,133
12/5/08 Encore Bancshares Inc. (Houston, TX) Pref. Stock w/ Warr. $34,000,000 $7.22 $74 $14.01 364,026 364,026 $(6.79) $755,556
12/5/08 First Defiance Financial Corp. (Defiance, OH) Pref. Stock w/ Warr. $37,000,000 $13.00 $106 $10.08 550,595 550,595 $2.92 $822,222
12/5/08 First Financial Holdings Inc. (Charleston, SC) Pref. Stock w/ Warr. $65,000,000 $9.40 $110 $20.17 483,391 483,391 $(10.77) $1,444,444
12/5/08 First Midwest Bancorp, Inc. (Itasca, IL) Pref. Stock w/ Warr. $193,000,000 $7.31 $355 $22.18 1,305,230 1,305,230 $(14.87) $4,288,889
12/5/08 FPB Bancorp, Inc. (Port St. Lucie, FL) Pref. Stock w/ Warr. $5,800,000 $2.50 $5 $4.75 183,158 183,158 $(2.25) $128,889
12/5/08 Great Southern Bancorp (Springfield, MO) Pref. Stock w/ Warr. $58,000,000 $20.55 $275 $9.57 909,091 909,091 $10.98 $1,288,889
12/5/08 Iberiabank Corporation (Lafayette ,LA ) Pref. Stock w/ Warr. $90,000,000 3/31/2009 5 $90,000,000 $0 5/20/09 Warrants 9 $1,200,000 $39.41 $636 $48.74 276,980 0 $(9.33) $1,450,000
12/5/08 Manhattan Bancorp (El Segundo, CA) Pref. Stock w/ Warr. $1,700,000 $6.00 $24 $8.65 29,480 29,480 $(2.65) $37,778
12/5/08 MB Financial Inc. (Chicago, IL) Pref. Stock w/ Warr. $196,000,000 $10.19 $360 $29.05 1,012,048 1,012,048 $(18.86) $4,355,556
12/5/08 Midwest Banc Holdings, Inc. (Melrose Pref. Stock w/ Warr. $84,784,000 $0.75 $21 $2.97 4,282,020 4,282,020 $(2.22) $824,289
Park, IL)
12/5/08 Oak Valley Bancorp (Oakdale, CA) Pref. Stock w/ Warr. $13,500,000 $4.25 $33 $5.78 350,346 350,346 $(1.53) $300,000
12/5/08 Old Line Bancshares, Inc. (Bowie, MD) Pref. Stock w/ Warr. $7,000,000 $5.90 $23 $7.40 141,892 141,892 $(1.50) $155,556
12/5/08 Popular, Inc. (San Juan, PR) Pref. Stock w/ Warr. $935,000,000 $2.20 $620 $6.70 20,932,836 20,932,836 $(4.50) $20,777,778
12/5/08 Sandy Spring Bancorp, Inc. (Olney, MD) Pref. Stock w/ Warr. $83,094,000 $14.70 $242 $19.13 651,547 651,547 $(4.43) $1,846,533
12/5/08 South Financial Group, Inc. (Greenville, SC) Pref. Stock w/ Warr. $347,000,000 $1.19 $101 $5.15 10,106,796 10,106,796 $(3.96) $7,711,111
12/5/08 Southern Community Financial Corp. Pref. Stock w/ Warr. $42,750,000 $2.71 $46 $3.95 1,623,418 1,623,418 $(1.24) $950,000
(Winston-Salem, NC )
12/5/08 Southern Missouri Bancorp, Inc. (Poplar Pref. Stock w/ Warr. $9,550,000 $9.95 $21 $12.53 114,326 114,326 $(2.58) $212,222
Bluff, MO)
TRANSACTION DETAIL I APPENDIX D I JULY 21, 2009
12/5/08 Southwest Bancorp, Inc. (Stillwater, OK) Pref. Stock w/ Warr. $70,000,000 $9.76 $143 $14.92 703,753 703,753 $(5.16) $1,555,556
12/5/08 State Bancorp, Inc. (Jericho, NY) Pref. Stock w/ Warr. $36,842,000 $7.56 $110 $11.87 465,569 465,569 $(4.31) $818,711
12/5/08 Sterling Financial Corporation (Spokane, WA) Pref. Stock w/ Warr. $303,000,000 $2.91 $152 $7.06 6,437,677 6,437,677 $(4.15) $6,733,333
12/5/08 Superior Bancorp Inc. (Birmingham, AL) Pref. Stock w/ Warr. $69,000,000 $2.61 $26 $5.38 1,923,792 1,923,792 $(2.77) $1,533,333
203
12/5/08 TIB Financial Corp (Naples, FL) Pref. Stock w/ Warr. $37,000,000 $2.80 $41 $5.12 1,063,218 1,084,589 $(2.32) $822,222
204

12/5/08 United Community Banks, Inc. (Blairsville, GA) Pref. Stock w/ Warr. $180,000,000 $5.99 $293 $12.47 2,132,701 2,165,638 $(6.48) $4,000,000
12/5/08 Unity Bancorp, Inc. (Clinton, NJ) Pref. Stock w/ Warr. $20,649,000 $3.55 $25 $4.05 764,778 764,778 $(0.50) $458,867
12/5/08 Wesbanco Bank Inc. (Wheeling, WV) Pref. Stock w/ Warr. $75,000,000 $14.54 $386 $25.61 439,282 439,282 $(11.07) $1,666,667
12/12/08 Bank of the Ozarks, Inc. (Little Rock, AR) Pref. Stock w/ Warr. $75,000,000 $21.63 $365 $29.62 379,811 379,811 $(7.99) $1,593,750
12/12/08 Capital Bank Corporation (Raleigh, NC) Pref. Stock w/ Warr. $41,279,000 $4.75 $54 $8.26 749,619 749,619 $(3.51) $877,179
12/12/08 Center Financial Corporation (Los Angeles, CA) Pref. Stock w/ Warr. $55,000,000 $2.52 $42 $9.54 864,780 864,780 $(7.02) $1,168,750
12/12/08 Citizens Republic Bancorp, Inc. (Flint, MI) Pref. Stock w/ Warr. $300,000,000 $0.71 $90 $2.56 17,578,125 17,578,125 $(1.85) $6,375,000
12/12/08 Citizens South Banking Corporation Pref. Stock w/ Warr. $20,500,000 $5.15 $39 $7.17 428,870 428,870 $(2.02) $435,625
(Gastonia, NC)
12/12/08 Fidelity Bancorp, Inc. (Pittsburgh, PA) Pref. Stock w/ Warr. $7,000,000 $6.51 $20 $8.65 121,387 121,387 $(2.14) $148,750
12/12/08 First Litchfield Financial Corporation Pref. Stock w/ Warr. $10,000,000 $5.70 $13 $7.53 199,203 199,203 $(1.83) $212,500
(Litchfield, CT)
12/12/08 HopFed Bancorp (Hopkinsville, KY) Pref. Stock w/ Warr. $18,400,000 $9.69 $35 $11.32 243,816 243,816 $(1.63) $391,000
12/12/08 Independent Bank Corporation (Ionia, MI) Pref. Stock w/ Warr. $72,000,000 $1.32 $32 $3.12 3,461,538 3,461,538 $(1.80) $1,530,000
12/12/08 Indiana Community Bancorp (Columbus, IN) Pref. Stock w/ Warr. $21,500,000 $12.96 $44 $17.09 188,707 188,707 $(4.13) $456,875
12/12/08 LNB Bancorp Inc. (Lorain, OH) Pref. Stock w/ Warr. $25,223,000 $6.35 $46 $6.74 561,343 561,343 $(0.39) $535,989
12/12/08 LSB Corporation (North Andover, MA) Pref. Stock w/ Warr. $15,000,000 $10.18 $46 $10.74 209,497 209,497 $(0.56) $318,750
12/12/08 National Penn Bancshares, Inc. (Boyertown, PA) Pref. Stock w/ Warr. $150,000,000 $4.61 $387 $15.30 1,470,588 1,470,588 $(10.69) $3,187,500
12/12/08 NewBridge Bancorp (Greensboro, NC) Pref. Stock w/ Warr. $52,372,000 $2.07 $32 $3.06 2,567,255 2,567,255 $(0.99) $1,112,905
12/12/08 Northeast Bancorp (Lewiston, ME) Pref. Stock w/ Warr. $4,227,000 $8.10 $19 $9.33 67,958 67,958 $(1.23) $89,824
12/12/08 Old National Bancorp (Evansville, IN) Pref. Stock w/ Warr. $100,000,000 3/31/2009 4 $100,000,000 $0 5/8/09 Warrants $1,200,000 $9.82 $652 $18.45 813,008 0 $(8.63) $1,513,889
12/12/08 Pacific International Bancorp (Seattle, WA) Pref. Stock w/ Warr. $6,500,000 $5.00 NA $7.63 127,785 127,785 $(2.63) $138,125
12/12/08 Pinnacle Financial Partners, Inc. (Nashville, Pref. Stock w/ Warr. $95,000,000 $13.32 $423 $26.64 534,910 534,910 $(13.32) $2,018,750
TN)
12/12/08 Signature Bank (New York, NY) Pref. Stock w/ Warr. $120,000,000 3/31/2009 4 $120,000,000 $0 $27.27 $965 $30.21 595,829 595,829 $(2.94) $1,816,667
12/12/08 Sterling Bancshares, Inc. (Houston, TX) Pref. Stock w/ Warr. $125,198,000 5/5/2009 4 $125,198,000 $0 $6.33 $510 $7.18 2,615,557 2,615,557 $(0.85) $2,486,571
12/12/08 Susquehanna Bancshares, Inc (Lititz, PA) Pref. Stock w/ Warr. $300,000,000 $4.89 $422 $14.86 3,028,264 3,028,264 $(9.97) $6,375,000
12/12/08 SVB Financial Group (Santa Clara, CA) Pref. Stock w/ Warr. $235,000,000 $27.22 $898 $49.78 708,116 708,116 $(22.56) $4,993,750
12/12/08 The Bancorp, Inc. (Wilmington, DE) Pref. Stock w/ Warr. $45,220,000 $6.00 $87 $3.46 1,960,405 1,960,405 $2.54 $960,925
12/12/08 TowneBank (Portsmouth, VA) Pref. Stock w/ Warr. $76,458,000 $14.00 $329 $21.31 538,184 538,184 $(7.31) $1,624,733
12/12/08 Valley Financial Corporation (Roanoke, VA) Pref. Stock w/ Warr. $16,019,000 $4.41 $21 $6.97 344,742 344,742 $(2.56) $340,404
12/12/08 Virginia Commerce Bancorp (Arlington, VA) Pref. Stock w/ Warr. $71,000,000 $2.30 $61 $3.95 2,696,203 2,696,203 $(1.65) $1,508,750
12/12/08 Wilmington Trust Corporation (Wilmington, Pref. Stock w/ Warr. $330,000,000 $13.66 $947 $26.66 1,856,714 1,856,714 $(13.00) $7,012,500
DE)
12/12/08 Wilshire Bancorp, Inc. (Los Angeles, CA) Pref. Stock w/ Warr. $62,158,000 $5.75 $169 $9.82 949,460 949,460 $(4.07) $1,320,858
12/19/08 Alliance Financial Corporation (Syracuse, NY) Pref. Stock w/ Warr. $26,918,000 5/13/2009 4 $26,918,000 $0 6/17/09 Warrants $900,000 $28.36 $130 $23.33 173,069 0 $5.03 $538,360
12/19/08 AmeriServ Financial, Inc (Johnstown, PA) Pref. Stock w/ Warr. $21,000,000 $1.85 $39 $2.40 1,312,500 1,312,500 $(0.55) $425,833
12/19/08 Bancorp Rhode Island, Inc. (Providence, RI) Pref. Stock w/ Warr. $30,000,000 $19.71 $91 $23.32 192,967 192,967 $(3.61) $608,333
12/19/08 BancTrust Financial Group, Inc. (Mobile, AL) Pref. Stock w/ Warr. $50,000,000 $2.98 $53 $10.26 730,994 730,994 $(7.28) $1,013,889
12/19/08 Berkshire Hills Bancorp, Inc. (Pittsfield, MA) Pref. Stock w/ Warr. $40,000,000 5/27/2009 4 $40,000,000 $0 6/24/09 Warrants $1,040,000 $20.78 $285 $26.51 226,330 0 $(5.73) $877,778
2
12/19/08 Bridgeview Bancorp, Inc. (Bridgeview, IL) Pref. Stock w/ Ex. Warr. $38,000,000 $839,906
12/19/08 Citizens First Corporation (Bowling Green, KY)Pref. Stock w/ Warr. $8,779,000 $5.50 $11 $5.18 254,218 254,218 $0.32 $178,019
12/19/08 CoBiz Financial Inc. (Denver, CO) Pref. Stock w/ Warr. $64,450,000 $6.41 $150 $10.79 895,968 895,968 $(4.38) $1,306,903
12/19/08 Community Bankers Trust Corporation (Glen Pref. Stock w/ Warr. $17,680,000 $3.70 $79 $3.40 780,000 780,000 $0.30 $358,511
Allen, VA)
12/19/08 Community Financial Corporation (Staunton, Pref. Stock w/ Warr. $12,643,000 $4.40 $19 $5.40 351,194 351,194 $(1.00) $256,372
VA)

12/19/08 Community West Bancshares (Goleta, CA) Pref. Stock w/ Warr. $15,600,000 $2.10 $12 $4.49 521,158 521,158 $(2.39) $316,333
12/19/08 Enterprise Financial Services Corp. (St. Pref. Stock w/ Warr. $35,000,000 $9.09 $117 $16.20 324,074 324,074 $(7.11) $709,722
Louis, MO)
12/19/08 Exchange Bank (Santa Rosa, CA)2 Pref. Stock w/ Ex. Warr. $43,000,000 $950,419
12/19/08 FCB Bancorp, Inc. (Louisville, KY)2 Pref. Stock w/ Ex. Warr. $9,294,000 $205,435
12/19/08 FFW Corporation (Wabash, IN)2 Pref. Stock w/ Ex. Warr. $7,289,000 $161,091
12/19/08 Fidelity Financial Corporation (Wichita, KS)2 Pref. Stock w/ Ex. Warr. $36,282,000 $801,929
12/19/08 Fidelity Southern Corporation (Atlanta, GA) Pref. Stock w/ Warr. $48,200,000 $2.90 $28 $3.16 2,266,458 2,289,179 $(0.26) $977,389
12/19/08 First California Financial Group, Inc (Westlake Pref. Stock w/ Warr. $25,000,000 $6.17 $72 $6.26 599,042 599,042 $(0.09) $506,944
Village, CA)
12/19/08 Flushing Financial Corporation (Lake Pref. Stock w/ Warr. $70,000,000 $9.35 $203 $13.97 751,611 751,611 $(4.62) $1,419,444
Success, NY)
12/19/08 Hawthorn Bancshares, Inc. (Lee’s Summit, Pref. Stock w/ Warr. $30,255,000 $9.90 $43 $18.49 245,443 245,443 $(8.59) $613,505
MO)
12/19/08 Heartland Financial USA, Inc. (Dubuque, IA) Pref. Stock w/ Warr. $81,698,000 $14.28 $233 $20.10 609,687 609,687 $(5.82) $1,656,654
12/19/08 Horizon Bancorp (Michigan City, IN) Pref. Stock w/ Warr. $25,000,000 $16.25 $53 $17.68 212,104 212,104 $(1.43) $506,944
12/19/08 Intermountain Community Bancorp Pref. Stock w/ Warr. $27,000,000 $3.40 $28 $6.20 653,226 653,226 $(2.80) $547,500
(Sandpoint, ID)
12/19/08 Marquette National Corporation (Chicago, IL)2 Pref. Stock w/ Ex. Warr. $35,500,000 $784,649
12/19/08 Mid Penn Bancorp, Inc. (Millersburg, PA) Pref. Stock w/ Warr. $10,000,000 $15.80 $55 $20.52 73,099 73,099 $(4.72) $202,778
12/19/08 Monadnock Bancorp, Inc. (Peterborough, Pref. Stock w/ Ex. Warr. $1,834,000 $40,547
NH)2
12/19/08 Monarch Financial Holdings, Inc. Pref. Stock w/ Warr. $14,700,000 $8.90 $52 $8.33 264,706 264,706 $0.57 $298,083
(Chesapeake, VA)
12/19/08 NCAL Bancorp (Los Angeles, CA)2 Pref. Stock w/ Ex. Warr. $10,000,000 $221,028
12/19/08 OneUnited Bank (Boston, MA)3 Pref. Stock $12,063,000 $93,823
12/19/08 Pacific City Financial Corporation (Los Pref. Stock w/ Ex. Warr. $16,200,000 $358,065
Angeles, CA)2
12/19/08 Patapsco Bancorp, Inc. (Dundalk, MD)2 Pref. Stock w/ Ex. Warr. $6,000,000 $132,617
12/19/08 Patriot Bancshares, Inc. (Houston, TX)2 Pref. Stock w/ Ex. Warr. $26,038,000 $575,516
12/19/08 Plains Capital Corporation (Dallas, TX)2 Pref. Stock w/ Ex. Warr. $87,631,000 $1,936,905
12/19/08 Santa Lucia Bancorp (Atascadero, CA) Pref. Stock w/ Warr. $4,000,000 $11.80 $23 $16.06 37,360 37,360 $(4.26) $81,111
12/19/08 Seacoast Banking Corporation of Florida Pref. Stock w/ Warr. $50,000,000 $2.43 $47 $6.36 1,179,245 1,179,245 $(3.93) $388,889
(Stuart, FL)
12/19/08 Security Federal Corporation (Aiken, SC) Pref. Stock w/ Warr. $18,000,000 $11.26 $28 $19.57 137,966 137,966 $(8.31) $365,000
12/19/08 StellarOne Corporation (Charlottesville, VA) Pref. Stock w/ Warr. $30,000,000 $12.95 $294 $14.87 302,623 302,623 $(1.92) $608,333
12/19/08 Summit State Bank (Santa Rosa, CA) Pref. Stock w/ Warr. $8,500,000 $6.75 $32 $5.33 239,212 239,212 $1.42 $172,361
12/19/08 Synovus Financial Corp. (Columbus, GA) Pref. Stock w/ Warr. $967,870,000 $2.99 $988 $9.36 15,510,737 15,510,737 $(6.37) $19,626,253
12/19/08 Tennessee Commerce Bancorp, Inc. Pref. Stock w/ Warr. $30,000,000 $4.76 $23 $9.75 461,538 461,538 $(4.99) $608,333
(Franklin, TN)
12/19/08 The Connecticut Bank and Trust Company Pref. Stock w/ Warr. $5,448,000 $5.15 $18 $4.65 175,742 175,742 $0.50
(Hartford, CT)
12/19/08 The Elmira Savings Bank, FSB (Elmira, NY) Pref. Stock w/ Warr. $9,090,000 $15.66 $30 $11.70 116,538 116,538 $3.96 $184,325
12/19/08 Tidelands Bancshares, Inc (Mt. Pleasant, SC) Pref. Stock w/ Warr. $14,448,000 $2.90 $12 $3.79 571,821 571,821 $(0.89) $292,973
12/19/08 Tri-County Financial Corporation (Waldorf, Pref. Stock w/ Ex. Warr. $15,540,000 $343,478
MD)2
12/19/08 Union Bankshares Corporation (Bowling Pref. Stock w/ Warr. $59,000,000 $14.97 $204 $20.94 422,636 422,636 $(5.97) $1,196,389
Green, VA)
12/19/08 VIST Financial Corp. (Wyomissing, PA) Pref. Stock w/ Warr. $25,000,000 $6.61 $38 $10.30 364,078 364,078 $(3.69) $506,944
12/19/08 Wainwright Bank & Trust Company (Boston, Pref. Stock w/ Warr. $22,000,000 $7.85 $57 $8.46 390,071 390,071 $(0.61) $446,111
MA)
205
206
12/19/08 Whitney Holding Corporation (New Orleans, Pref. Stock w/ Warr. $300,000,000 $9.16 $617 $17.10 2,631,579 2,631,579 $(7.94) $6,083,333
LA)
12/19/08 Wintrust Financial Corporation (Lake Pref. Stock w/ Warr. $250,000,000 $16.08 $385 $22.82 1,643,295 1,643,295 $(6.74) $5,069,444
Forest, IL)
12/23/08 1st Constitution Bancorp (Cranbury, NJ) Pref. Stock w/ Warr. $12,000,000 $8.50 $36 $8.56 200,222 210,233 $(0.06) $236,667
12/23/08 BCSB Bancorp, Inc. (Baltimore, MD) Pref. Stock w/ Warr. $10,800,000 $8.10 $25 $8.83 183,465 183,465 $(0.73) $213,000
12/23/08 Bridge Capital Holdings (San Jose, CA) Pref. Stock w/ Warr. $23,864,000 $6.15 $42 $9.03 396,412 396,412 $(2.88) $470,651
12/23/08 Cache Valley Banking Company (Logan, UT)2 Pref. Stock w/ Ex. Warr. $4,767,000 $102,465
12/23/08 Capital Bancorp, Inc. (Rockville, MD)2 Pref. Stock w/ Ex. Warr. $4,700,000 $101,037
12/23/08 Capital Pacific Bancorp (Portland, OR)2 Pref. Stock w/ Ex. Warr. $4,000,000 $85,989
12/23/08 Cecil Bancorp, Inc. (Elkton, MD) Pref. Stock w/ Warr. $11,560,000 $4.40 $16 $6.63 261,538 261,538 $(2.23) $227,989
12/23/08 Central Jersey Bancorp (Oakhurst, NJ) Pref. Stock w/ Warr. $11,300,000 $5.50 $50 $6.31 268,621 268,621 $(0.81) $222,861
12/23/08 Citizens Bancorp (Nevada City, CA)2 Pref. Stock w/ Ex. Warr. $10,400,000 $223,571
12/23/08 Citizens Community Bank (South Hill, VA)2 Pref. Stock w/ Ex. Warr. $3,000,000 $64,492
12/23/08 Community Investors Bancorp, Inc. (Bucyrus, Pref. Stock w/ Ex. Warr. $2,600,000 $55,893
OH)2
12/23/08 Emclaire Financial Corp. (Emlenton, PA) Pref. Stock w/ Warr. $7,500,000 $18.00 $26 $22.45 50,111 50,111 $(4.45) $147,917
12/23/08 Financial Institutions, Inc. (Warsaw, NY) Pref. Stock w/ Warr. $37,515,000 $13.66 $148 $14.88 378,175 378,175 $(1.22) $739,880
12/23/08 First Community Bank Corporation of Pref. Stock w/ Warr. $10,685,000 $3.76 $16 $7.02 228,312 228,312 $(3.26) $210,732
America (Pinellas Park, FL)
12/23/08 First Financial Bancorp (Cincinnati, OH) Pref. Stock w/ Warr. $80,000,000 $7.53 $373 $12.90 930,233 930,233 $(5.37) $1,577,778
12/23/08 First Sound Bank (Seattle, WA) Pref. Stock w/ Warr. $7,400,000 $3.00 NA $9.73 114,080 114,080 $(6.73) $145,944
12/23/08 Fulton Financial Corporation (Lancaster, PA) Pref. Stock w/ Warr. $376,500,000 $5.19 $911 $10.25 5,509,756 5,509,756 $(5.06) $7,425,417
12/23/08 Green Bankshares, Inc. (Greeneville, TN) Pref. Stock w/ Warr. $72,278,000 $4.48 $59 $17.06 635,504 635,504 $(12.58) $1,425,483
12/23/08 HMN Financial, Inc. (Rochester, MN) Pref. Stock w/ Warr. $26,000,000 $3.51 $15 $4.68 833,333 833,333 $(1.17) $512,778
12/23/08 International Bancshares Corporation Pref. Stock w/ Warr. $216,000,000 $10.31 $707 $24.43 1,326,238 1,326,238 $(14.12) $4,260,000
(Laredo, TX)
12/23/08 Intervest Bancshares Corporation (New Pref. Stock w/ Warr. $25,000,000 $3.50 $29 $5.42 691,882 691,882 $(1.92) $493,056
York, NY)
12/23/08 Leader Bancorp, Inc. (Arlington, MA)2 Pref. Stock w/ Ex. Warr. $5,830,000 $125,347
12/23/08 M&T Bank Corporation (Buffalo, NY) Pref. Stock w/ Warr. $600,000,000 $50.93 $5,659 $73.86 1,218,522 1,218,522 $(22.93) $11,833,333
12/23/08 Magna Bank (Memphis, TN)2 Pref. Stock w/ Ex. Warr. $13,795,000 $296,564
12/23/08 Mission Valley Bancorp (Sun Valley, CA)3 Pref. Stock $5,500,000 $108,472
12/23/08 MutualFirst Financial, Inc. (Muncie, IN) Pref. Stock w/ Warr. $32,382,000 $8.96 $63 $7.77 625,135 625,135 $1.19 $638,645
12/23/08 Nicolet Bankshares, Inc. (Green Bay, WI)2 Pref. Stock w/ Ex. Warr. $14,964,000 $321,677
12/23/08 Pacific Coast Bankers’ Bancshares (San Pref. Stock w/ Ex. Warr. $11,600,000 $249,368
Francisco, CA)2
12/23/08 Pacific Commerce Bank (Los Angeles, CA)2 Pref. Stock w/ Ex. Warr. $4,060,000 $55,318
12/23/08 Park National Corporation (Newark, OH) Pref. Stock w/ Warr. $100,000,000 $56.48 $789 $65.97 227,376 227,376 $(9.49) $1,972,222
12/23/08 Parkvale Financial Corporation (Monroeville, Pref. Stock w/ Warr. $31,762,000 $8.99 $49 $12.66 376,327 376,327 $(3.67) $626,417
PA)
12/23/08 Peoples Bancorp of North Carolina, Inc. Pref. Stock w/ Warr. $25,054,000 $6.15 $34 $10.52 357,234 357,234 $(4.37) $494,121
(Newton, NC)
12/23/08 Saigon National Bank (Westminster, CA)2 Pref. Stock w/ Ex. Warr. $1,549,000
12/23/08 Seacoast Commerce Bank (Chula Vista, CA)2 Pref. Stock w/ Ex. Warr. $1,800,000 $38,695
12/23/08 Sterling Bancorp (New York, NY) Pref. Stock w/ Warr. $42,000,000 $8.35 $151 $12.19 516,817 516,817 $(3.84) $828,333
12/23/08 TCNB Financial Corp. (Dayton, OH)2 Pref. Stock w/ Ex. Warr. $2,000,000 $42,994
12/23/08 Tennessee Valley Financial Holdings, Inc. (Oak Pref. Stock w/ Ex. Warr. $3,000,000 $64,492
Ridge, TN)2
12/23/08 The Little Bank, Incorporated (Kinston, NC)2 Pref. Stock w/ Ex. Warr. $7,500,000 $161,230

12/23/08 Timberland Bancorp, Inc. (Hoquiam, WA) Pref. Stock w/ Warr. $16,641,000 $4.10 $29 $6.73 370,899 370,899 $(2.63) $328,198
12/23/08 United Bancorporation of Alabama, Inc. Pref. Stock w/ Warr. $10,300,000 $15.50 NA $14.85 104,040 104,040 $0.65 $203,139
(Atmore, AL)
12/23/08 Uwharrie Capital Corp (Albemarle, NC)2 Pref. Stock w/ Ex. Warr. $10,000,000 $214,972
12/23/08 Western Community Bancshares, Inc. (Palm Pref. Stock w/ Ex. Warr. $7,290,000 $156,733
Desert, CA)2
12/23/08 Western Illinois Bancshares Inc. (Monmouth, Pref. Stock w/ Ex. Warr. $6,855,000 $147,373
IL)2
12/31/08 CIT Group Inc. (New York, NY) Pref. Stock w/ Warr. $2,330,000,000 $2.15 $836 $3.94 88,705,584 88,705,584 $(1.79) $43,687,500
12/31/08 Fifth Third Bancorp (Cincinnati, OH) Pref. Stock w/ Warr. $3,408,000,000 $7.10 $5,645 $11.72 43,617,747 43,617,747 $(4.62) $85,200,000
12/31/08 First Banks, Inc. (Clayton, MO)2 Pref. Stock w/ Ex. Warr. $295,400,000 $6,037,238
12/31/08 Hampton Roads Bankshares, Inc. (Norfolk, Pref. Stock w/ Warr. $80,347,000 $8.25 $180 $9.09 1,325,858 1,325,858 $(0.84) $1,506,507
VA)
12/31/08 SunTrust Banks, Inc. (Atlanta, GA) Pref. Stock w/ Warr. $1,350,000,000 $16.45 $7,644 $33.70 6,008,902 6,008,902 $(17.25) See note c
12/31/08 The PNC Financial Services Group Inc. Pref. Stock w/ Warr. $7,579,200,000 $38.81 $17,275 $67.33 16,885,192 16,885,192 $(28.52) $142,110,000
(Pittsburgh, PA)
12/31/08 West Bancorporation, Inc. (West Des Pref. Stock w/ Warr. $36,000,000 $5.06 $88 $11.39 474,100 474,100 $(6.33) $675,000
Moines, IA)
1/9/09 American Express Company (New York, NY) Pref. Stock w/ Warr. $3,388,890,000 6/17/2009 4 $3,388,890,000 $0 $23.24 $27,136 $20.95 24,264,129 24,264,129 $2.29 $74,367,308
1/9/09 American State Bancshares, Inc. (Great Pref. Stock w/ Ex. Warr. $6,000,000 $114,450
Bend, KS)2
1/9/09 Bank of America Corporation (Charlotte, NC)1 Pref. Stock w/ Warr. $10,000,000,000 $13.20 $104,544 $30.79 48,717,116 48,717,116 $(17.59) $175,000,000
1/9/09 C&F Financial Corporation (West Point, VA) Pref. Stock w/ Warr. $20,000,000 $16.50 $50 $17.91 167,504 167,504 $(1.41) $350,000
1/9/09 Cadence Financial Corporation (Starkville, Pref. Stock w/ Warr. $44,000,000 $2.23 $27 $5.76 1,145,833 1,145,833 $(3.53) $770,000
MS)
1/9/09 Carolina Bank Holdings, Inc. (Greensboro, NC) Pref. Stock w/ Warr. $16,000,000 $4.28 $14 $6.71 357,675 357,675 $(2.44) $280,000
1/9/09 Center Bancorp, Inc. (Union, NJ) Pref. Stock w/ Warr. $10,000,000 $8.15 $106 $8.65 173,410 173,410 $(0.50) $175,000
1/9/09 Central Pacific Financial Corp. (Honolulu, HI) Pref. Stock w/ Warr. $135,000,000 $3.75 $108 $12.77 1,585,748 1,585,748 $(9.02) $2,362,500
1/9/09 Centrue Financial Corporation (St. Louis, MO) Pref. Stock w/ Warr. $32,668,000 $9.64 508,320 508,320 $(9.64) $571,690
1/9/09 Codorus Valley Bancorp, Inc. (York, PA) Pref. Stock w/ Warr. $16,500,000 $6.30 $25 $9.38 263,859 263,859 $(3.08) $288,750
1/9/09 Colony Bankcorp, Inc. (Fitzgerald, GA) Pref. Stock w/ Warr. $28,000,000 $7.11 $51 $8.40 500,000 500,000 $(1.29) $490,000
1/9/09 Commerce National Bank (Newport Beach, Pref. Stock w/ Warr. $5,000,000 $5.75 $15 $8.60 87,209 87,209 $(2.85)
CA)
1/9/09 Community Trust Financial Corporation Pref. Stock w/ Ex. Warr. $24,000,000 $457,800
(Ruston, LA)2
1/9/09 Congaree Bancshares, Inc. (Cayce, SC)2 Pref. Stock w/ Ex. Warr. $3,285,000 $62,654
1/9/09 Crescent Financial Corporation (Cary, NC) Pref. Stock w/ Warr. $24,900,000 $3.80 $37 $4.48 833,705 833,705 $(0.68) $435,750
1/9/09 Eastern Virginia Bankshares, Inc. Pref. Stock w/ Warr. $24,000,000 $8.64 $51 $9.63 373,832 373,832 $(0.99) $420,000
(Tappahannock, VA)
1/9/09 F.N.B. Corporation (Hermitage, PA) Pref. Stock w/ Warr. $100,000,000 $6.19 $686 $11.52 1,302,083 1,302,083 $(5.33) $1,750,000
1/9/09 Farmers Capital Bank Corporation (Frankfort, Pref. Stock w/ Warr. $30,000,000 $25.17 $185 $20.09 223,992 223,992 $5.08 $525,000
KY)
1/9/09 First Bancorp (Troy, NC) Pref. Stock w/ Warr. $65,000,000 $15.68 $261 $15.82 616,308 616,308 $(0.14) $1,137,500
1/9/09 First Financial Service Corporation Pref. Stock w/ Warr. $20,000,000 $17.41 $83 $13.89 215,983 215,983 $3.52 $350,000
(Elizabethtown, KY)
1/9/09 First Security Group, Inc. (Chattanooga, TN) Pref. Stock w/ Warr. $33,000,000 $3.80 $62 $6.01 823,627 823,627 $(2.21) $577,500
1/9/09 FirstMerit Corporation (Akron, OH) Pref. Stock w/ Warr. $125,000,000 4/22/2009 4 $125,000,000 $0 5/27/09 Warrants $5,025,000 $17.00 $1,393 $19.69 952,260 0 $(2.69) $1,788,194
1/9/09 GrandSouth Bancorporation (Greenville, SC)2 Pref. Stock w/ Ex. Warr. $9,000,000 $171,675
1/9/09 Independence Bank (East Greenwich, RI)2 Pref. Stock w/ Ex. Warr. $1,065,000 $20,307
207
208

1/9/09 Independent Bank Corp. (Rockland, MA) Pref. Stock w/ Warr. $78,158,000 4/22/2009 4 $78,158,000 $0 5/27/09 Warrants $2,200,000 $19.70 $412 $24.34 481,664 0 $(4.64) $1,118,094
1/9/09 LCNB Corp. (Lebanon, OH) Pref. Stock w/ Warr. $13,400,000 $9.85 $66 $9.26 217,063 217,063 $0.59 $234,500
1/9/09 MidSouth Bancorp, Inc. (Lafayette, LA) Pref. Stock w/ Warr. $20,000,000 $16.80 $114 $14.32 208,768 208,768 $2.48 $350,000
1/9/09 Mission Community Bancorp (San Luis Pref. Stock $5,116,000 $89,530
Obispo, CA)3
1/9/09 New York Private Bank & Trust Corporation Pref. Stock w/ Ex. Warr. $267,274,000 $5,098,261
(New York, NY)2
1/9/09 North Central Bancshares, Inc. (Fort Pref. Stock w/ Warr. $10,200,000 $14.10 $19 $15.43 99,157 99,157 $(1.33) $178,500
Dodge, IA)
1/9/09 Peapack-Gladstone Financial Corporation( Pref. Stock w/ Warr. $28,685,000 $19.29 $160 $30.06 143,139 143,139 $(10.77) $501,988
Gladstone, NJ)
1/9/09 Redwood Financial Inc. (Redwood Falls, MN)2 Pref. Stock w/ Ex. Warr. $2,995,000 $57,138
1/9/09 Rising Sun Bancorp (Rising Sun, MD)2 Pref. Stock w/ Ex. Warr. $5,983,000 $114,122
1/9/09 Security Business Bancorp (San Diego, CA)2 Pref. Stock w/ Ex. Warr. $5,803,000 $110,688
1/9/09 Security California Bancorp (Riverside, CA)2 Pref. Stock w/ Ex. Warr. $6,815,000 $130,005
1/9/09 Shore Bancshares, Inc. (Easton, MD) Pref. Stock w/ Warr. $25,000,000 4/15/2009 4 $25,000,000 $0 $17.94 $151 $21.68 172,970 172,970 $(3.74) $333,333
1/9/09 Sound Banking Company (Morehead City, NC)2 Pref. Stock w/ Ex. Warr. $3,070,000 $58,576
1/9/09 Sun Bancorp, Inc. (Vineland, NJ) Pref. Stock w/ Warr. $89,310,000 4/8/2009 4 $89,310,000 $0 5/27/09 Warrants $2,100,000 $5.18 $120 $8.27 1,543,376 0 $(3.09) $1,103,971
1/9/09 Surrey Bancorp (Mount Airy, NC)2 Pref. Stock w/ Ex. Warr. $2,000,000 $38,150
1/9/09 Texas National Bancorporation (Jacksonville, Pref. Stock w/ Ex. Warr. $3,981,000 $75,937
TX)2
1/9/09 The First Bancorp, Inc. (Damariscotta, ME) Pref. Stock w/ Warr. $25,000,000 $19.47 $189 $16.60 225,904 225,904 $2.87 $437,500
1/9/09 The Queensborough Company (Louisville, Pref. Stock w/ Ex. Warr. $12,000,000 $228,900
GA)2
1/9/09 Valley Community Bank (Pleasanton, CA)2 Pref. Stock w/ Ex. Warr. $5,500,000 $104,913
1/16/09 Bank of Commerce (Charlotte, NC)2 Pref. Stock w/ Ex. Warr. $3,000,000 $54,046
1/16/09 Bar Harbor Bankshares/Bar Harbor Bank & Pref. Stock w/ Warr. $18,751,000 $30.85 $89 $26.81 104,910 104,910 $4.04 $309,913
Trust (Bar Harbor, ME)
1/16/09 BNCCORP, Inc. (Bismarck, ND)2 Pref. Stock w/ Ex. Warr. $20,093,000 $361,992
1/16/09 Carver Bancorp, Inc (New York, NY )3 Pref. Stock $18,980,000 $313,697
1/16/09 Centra Financial Holdings, Inc./Centra Bank, Pref. Stock w/ Ex. Warr. $15,000,000 3/31/2009 4 $15,000,000 $0 4/15/09 Preferred Stock2, 7 $750,000 $172,938
Inc. (Morgantown, WV)2
1/16/09 Citizens & Northern Corporation (Wellsboro, Pref. Stock w/ Warr. $26,440,000 $20.57 $185 $20.36 194,794 194,794 $0.21 $436,994
PA)
1/16/09 Community 1st Bank (Roseville, CA)2 Pref. Stock w/ Ex. Warr. $2,550,000 $34,755
1/16/09 Community Bank of the Bay (Oakland, CA)3 Pref. Stock $1,747,000
1/16/09 Dickinson Financial Corporation II (Kansas Pref. Stock w/ Ex. Warr. $146,053,000 $2,631,197
City, MO)2
1/16/09 ECB Bancorp, Inc./East Carolina Bank Pref. Stock w/ Warr. $17,949,000 $19.50 $55 $18.57 144,984 144,984 $0.93 $296,658
(Engelhard, NC)
1/16/09 First BanCorp (San Juan, PR) Pref. Stock w/ Warr. $400,000,000 $3.95 $366 $10.27 5,842,259 5,842,259 $(6.32) $6,611,111
1/16/09 First Bankers Trustshares, Inc. (Quincy, IL)2 Pref. Stock w/ Ex. Warr. $10,000,000 $180,153
1/16/09 First Manitowoc Bancorp, Inc. (Manitowoc, WI)2 Pref. Stock w/ Ex. Warr. $12,000,000 5/27/2009 4 $12,000,000 $0 5/27/09 Preferred Stock2, 7 $600,000 $237,983
1/16/09 Home Bancshares, Inc. (Conway, AR) Pref. Stock w/ Warr. $50,000,000 $19.04 $379 $26.03 288,129 288,129 $(6.99) $826,389
1/16/09 Idaho Bancorp (Boise, ID)2 Pref. Stock w/ Ex. Warr. $6,900,000 $124,306
1/16/09 MainSource Financial Group, Inc.(Greensburg, Pref. Stock w/ Warr. $57,000,000 $7.42 $149 $14.95 571,906 571,906 $(7.53) $942,083
IN)
1/16/09 MetroCorp Bancshares, Inc. (Houston, TX) Pref. Stock w/ Warr. $45,000,000 $3.10 $34 $8.75 771,429 771,429 $(5.65) $743,750
1/16/09 Morrill Bancshares, Inc. (Merriam, KS)2 Pref. Stock w/ Ex. Warr. $13,000,000 $234,199
1/16/09 New Hampshire Thrift Bancshares, Inc. Pref. Stock w/ Warr. $10,000,000 $9.85 $57 $8.14 184,275 184,275 $1.71 $165,278
(Newport, NH)

1/16/09 OceanFirst Financial Corp. (Toms River, NJ) Pref. Stock w/ Warr. $38,263,000 $11.97 $148 $15.07 380,853 380,853 $(3.10) $632,403
1/16/09 Old Second Bancorp, Inc. (Aurora, IL) Pref. Stock w/ Warr. $73,000,000 $5.90 $82 $13.43 815,339 815,339 $(7.53) $1,206,528
1/16/09 Pacific Coast National Bancorp (San Pref. Stock w/ Ex. Warr. $4,120,000 $18,088
Clemente, CA)2
1/16/09 Puget Sound Bank (Bellevue, WA)2 Pref. Stock w/ Ex. Warr. $4,500,000 $81,069
1/16/09 Pulaski Financial Corp (Creve Coeur, MO) Pref. Stock w/ Warr. $32,538,000 $6.60 $68 $6.27 778,421 778,421 $0.33 $537,781
1/16/09 Redwood Capital Bancorp (Eureka, CA)2 Pref. Stock w/ Ex. Warr. $3,800,000 $68,458
1/16/09 S&T Bancorp (Indiana, PA) Pref. Stock w/ Warr. $108,676,000 $12.16 $336 $31.53 517,012 517,012 $(19.37) $1,796,173
1/16/09 SCBT Financial Corporation (Columbia, SC) Pref. Stock w/ Warr. $64,779,000 5/20/2009 4 $64,779,000 $0 6/24/09 Warrants $1,400,000 $23.69 $299 $32.06 303,083 0 $(8.37) $1,115,639
1/16/09 Somerset Hills Bancorp (Bernardsville, NJ) Pref. Stock w/ Warr. $7,414,000 5/20/2009 4 $7,414,000 $0 6/24/09 Warrants $275,000 $7.50 $39 $6.82 163,065 0 $0.68 $127,686
1/16/09 Southern Bancorp, Inc. (Arkadelphia, AR)3 Pref. Stock $11,000,000 $181,806
1/16/09 State Bankshares, Inc. (Fargo, ND)2 Pref. Stock w/ Ex. Warr. $50,000,000 $900,764
1/16/09 Syringa Bancorp (Boise, ID)2 Pref. Stock w/ Ex. Warr. $8,000,000 $144,122
1/16/09 TCB Holding Company, Texas Community Pref. Stock w/ Ex. Warr. $11,730,000 $211,335
Bank (The Woodlands, TX)2
4
1/16/09 Texas Capital Bancshares, Inc. (Dallas, TX) Pref. Stock w/ Warr. $75,000,000 5/13/2009 $75,000,000 $0 $15.47 $551 $14.84 758,086 758,086 $0.63 $1,218,750
1/16/09 The Baraboo Bancorporation (Baraboo, WI)2 Pref. Stock w/ Ex. Warr. $20,749,000 $373,787
1/16/09 Treaty Oak Bancorp, Inc. (Austin,TX)2 Pref. Stock w/ Ex. Warr. $3,268,000 $58,863
1/16/09 United Bancorp, Inc. (Tecumseh, MI) Pref. Stock w/ Warr. $20,600,000 $6.10 $31 $9.92 311,492 311,492 $(3.82) $340,472
1/16/09 United Financial Banking Companies, Inc. Pref. Stock w/ Ex. Warr. $5,658,000 $101,934
(Vienna, VA)2
1/16/09 Washington Banking Company/Whidbey Pref. Stock w/ Warr. $26,380,000 $9.42 $90 $8.04 492,164 492,164 $1.38 $436,003
Island Bank (Oak Harbor, WA)
1/16/09 Yadkin Valley Financial Corporation (Elkin, NC) Pref. Stock w/ Warr. $36,000,000 $6.91 $111 $13.99 385,990 385,990 $(7.08) $595,000
1/23/09 1st Source Corporation (South Bend, IN) Pref. Stock w/ Warr. $111,000,000 $17.27 $418 $19.87 837,947 837,947 $(2.60) $1,726,667
1/23/09 AB&T Financial Corporation (Gastonia, NC) Pref. Stock w/ Warr. $3,500,000 $5.25 $14 $6.55 80,153 80,153 $(1.30) $54,444
1/23/09 Alarion Financial Services, Inc. (Ocala, FL)2 Pref. Stock w/ Ex. Warr. $6,514,000 $110,457
1/23/09 BankFirst Capital Corporation (Macon, MS)2 Pref. Stock w/ Ex. Warr. $15,500,000 $262,812
1/23/09 California Oaks State Bank (Thousand Pref. Stock w/ Ex. Warr. $3,300,000 $55,954
Oaks, CA)2
1/23/09 Calvert Financial Corporation (Ashland, MO)2 Pref. Stock w/ Ex. Warr. $1,037,000 $17,588
1/23/09 CalWest Bancorp (Rancho Santa Margarita, Pref. Stock w/ Ex. Warr. $4,656,000 $78,951
CA)2
1/23/09 Commonwealth Business Bank (Los Angeles, Pref. Stock w/ Ex. Warr. $7,701,000 $25,648
CA)2
2
1/23/09 Crosstown Holding Company (Blaine, MN) Pref. Stock w/ Ex. Warr. $10,650,000 $180,591
1/23/09 Farmers Bank (Windsor, VA)2 Pref. Stock w/ Ex. Warr. $8,752,000 $148,406
1/23/09 First Citizens Banc Corp (Sandusky, OH) Pref. Stock w/ Warr. $23,184,000 $5.01 $39 $7.41 469,312 469,312 $(2.40) $360,640
1/23/09 First ULB Corp. (Oakland, CA)2 Pref. Stock w/ Ex. Warr. $4,900,000 4/22/2009 4 $4,900,000 $0 4/22/09 Preferred Stock2, 7 $245,000 $66,021
1/23/09 FPB Financial Corp. (Hammond, LA)2 Pref. Stock w/ Ex. Warr. $3,240,000 $54,936
1/23/09 Fresno First Bank (Fresno, CA)2 Pref. Stock w/ Ex. Warr. $1,968,000
1/23/09 Liberty Bancshares, Inc. (Jonesboro, AR)2 Pref. Stock w/ Ex. Warr. $57,500,000 $974,945
1/23/09 Midland States Bancorp, Inc. (Effingham, IL)2 Pref. Stock w/ Ex. Warr. $10,189,000 $172,749
1/23/09 Moscow Bancshares, Inc. (Moscow, TN)2 Pref. Stock w/ Ex. Warr. $6,216,000 $105,402
1/23/09 Pierce County Bancorp (Tacoma, WA)2 Pref. Stock w/ Ex. Warr. $6,800,000 $115,298
1/23/09 Princeton National Bancorp, Inc. (Princeton, IL) Pref. Stock w/ Warr. $25,083,000 $14.60 $48 $24.27 155,025 155,025 $(9.67) $390,180
1/23/09 Seaside National Bank & Trust (Orlando, FL)2 Pref. Stock w/ Ex. Warr. $5,677,000 $96,261
1/23/09 Southern Illinois Bancorp, Inc. (Carmi, IL)2 Pref. Stock w/ Ex. Warr. $5,000,000 $84,778
1/23/09 Stonebridge Financial Corp. (West Chester, PA)2 Pref. Stock w/ Ex. Warr. $10,973,000 $186,064
209
210
1/23/09 WSFS Financial Corporation (Wilmington, DE) Pref. Stock w/ Warr. $52,625,000 $27.31 $169 $45.08 175,105 175,105 $(17.77) $818,612
1/30/09 Adbanc, Inc (Ogallala, NE)2 Pref. Stock w/ Ex. Warr. $12,720,000 $202,195
1/30/09 AMB Financial Corp. (Munster, IN)2 Pref. Stock w/ Ex. Warr. $3,674,000 $58,409
1/30/09 Anchor BanCorp Wisconsin Inc. (Madison, WI) Pref. Stock w/ Warr. $110,000,000 $1.30 $28 $2.23 7,399,103 7,399,103 $(0.93)
1/30/09 Annapolis Bancorp, Inc. (Annapolis, MD) Pref. Stock w/ Warr. $8,152,000 $3.80 $15 $4.08 299,706 299,706 $(0.28) $118,883
1/30/09 Bankers’ Bank of the West Bancorp, Inc. Pref. Stock w/ Ex. Warr. $12,639,000 $200,909
(Denver, CO)2
1/30/09 Beach Business Bank (Manhattan Beach, CA)2 Pref. Stock w/ Ex. Warr. $6,000,000 $95,375
1/30/09 Central Bancshares, Inc. (Houston, TX)2 Pref. Stock w/ Ex. Warr. $5,800,000 $92,196
1/30/09 Central Valley Community Bancorp (Fresno, CA) Pref. Stock w/ Warr. $7,000,000 $5.19 $40 $6.64 158,133 158,133 $(1.45) $102,083
1/30/09 Central Virginia Bankshares, Inc. (Powhatan, VA) Pref. Stock w/ Warr. $11,385,000 $4.25 $11 $6.48 263,542 263,542 $(2.23) $166,031
1/30/09 Community Partners Bancorp (Middletown, NJ) Pref. Stock w/ Warr. $9,000,000 $4.20 $29 $4.68 288,462 288,462 $(0.48) $131,250
1/30/09 Country Bank Shares, Inc. (Milford, NE)2 Pref. Stock w/ Ex. Warr. $7,525,000 $119,610
1/30/09 DNB Financial Corporation (Downingtown, PA) Pref. Stock w/ Warr. $11,750,000 $7.55 $20 $9.46 186,311 186,311 $(1.91) $171,354
1/30/09 Equity Bancshares, Inc. (Wichita, KS)2 Pref. Stock w/ Ex. Warr. $8,750,000 $139,102
1/30/09 F & M Bancshares, Inc. (Trezevant, TN)2 Pref. Stock w/ Ex. Warr. $4,609,000 $73,252
1/30/09 First Resource Bank (Exton, PA)2 Pref. Stock w/ Ex. Warr. $2,600,000 $41,330
1/30/09 First Southern Bancorp, Inc. (Boca Raton, FL)2 Pref. Stock w/ Ex. Warr. $10,900,000 $173,264
1/30/09 First United Corporation (Oakland, MD) Pref. Stock w/ Warr. $30,000,000 $11.25 $69 $13.79 326,323 326,323 $(2.54) $437,500
1/30/09 Firstbank Corporation (Alma, MI) Pref. Stock w/ Warr. $33,000,000 $7.05 $54 $8.55 578,947 578,947 $(1.50) $481,250
1/30/09 Flagstar Bancorp, Inc. (Troy, MI) Pref. Stock w/ Warr. $266,657,000 $0.68 $61 $0.62 64,513,790 64,513,790 $0.06 $3,888,747
1/30/09 Goldwater Bank, N.A. (Scottsdale, AZ)2 Pref. Stock w/ Ex. Warr. $2,568,000 $40,810
1/30/09 Greer Bancshares Incorporated (Greer, SC)2 Pref. Stock w/ Ex. Warr. $9,993,000 $158,856
1/30/09 Guaranty Federal Bancshares, Inc. Pref. Stock w/ Warr. $17,000,000 $6.90 $18 $5.55 459,459 459,459 $1.35 $247,917
(Springfield, MO)
1/30/09 Hilltop Community Bancorp, Inc. (Summit, NJ)2 Pref. Stock w/ Ex. Warr. $4,000,000 $63,583
1/30/09 Katahdin Bankshares Corp. (Houlton, ME)2 Pref. Stock w/ Ex. Warr. $10,449,000 $166,084
1/30/09 Legacy Bancorp, Inc. (Milwaukee, WI)3 Pref. Stock $5,498,000 $80,179
1/30/09 Metro City Bank (Doraville, GA)2 Pref. Stock w/ Ex. Warr. $7,700,000 $122,398
1/30/09 Middleburg Financial Corporation (Middleburg, Pref. Stock w/ Warr. $22,000,000 $13.76 $65 $15.85 208,202 208,202 $(2.09) $320,833
VA)
1/30/09 Monument Bank (Bethesda, MD)2 Pref. Stock w/ Ex. Warr. $4,734,000 $75,258
1/30/09 Northway Financial, Inc. (Berlin, NH)2 Pref. Stock w/ Ex. Warr. $10,000,000 $158,958
1/30/09 Oak Ridge Financial Services, Inc. Pref. Stock w/ Warr. $7,700,000 $7.20 $13 $7.05 163,830 163,830 $0.15 $112,292
(Oak Ridge, NC)
1/30/09 Ojai Community Bank (Ojai, CA)2 Pref. Stock w/ Ex. Warr. $2,080,000 $33,063
1/30/09 Parke Bancorp, Inc. (Sewell, NJ) Pref. Stock w/ Warr. $16,288,000 $9.16 $37 $8.15 299,779 299,779 $1.01 $237,533
1/30/09 Peninsula Bank Holding Co. (Palo Alto, CA) Pref. Stock w/ Warr. $6,000,000 $9.25 $17 $11.02 81,670 81,670 $(1.77)
1/30/09 Peoples Bancorp Inc. (Marietta, OH) Pref. Stock w/ Warr. $39,000,000 $17.05 $178 $18.86 313,505 313,505 $(1.81) $568,750
1/30/09 Plumas Bancorp (Quincy, CA) Pref. Stock w/ Warr. $11,949,000 $4.99 $24 $7.54 237,712 237,712 $(2.55) $174,256
1/30/09 PrivateBancorp, Inc. (Chicago, IL) Pref. Stock w/ Warr. $243,815,000 $22.24 $1,013 $28.35 1,290,026 1,290,026 $(6.11) $3,555,635
1/30/09 Rogers Bancshares, Inc. (Little Rock, AR)2 Pref. Stock w/ Ex. Warr. $25,000,000 $397,396
1/30/09 Stewardship Financial Corporation (Midland Pref. Stock w/ Warr. $10,000,000 $9.50 $53 $11.80 127,119 127,119 $(2.30) $145,833
Park, NJ)
1/30/09 UBT Bancshares, Inc. (Marysville, KS)2 Pref. Stock w/ Ex. Warr. $8,950,000 $142,334
1/30/09 Valley Commerce Bancorp (Visalia, CA)2 Pref. Stock w/ Ex. Warr. $7,700,000 $122,398
1/30/09 W.T.B. Financial Corporation (Spokane, WA)2 Pref. Stock w/ Ex. Warr. $110,000,000 $1,748,541

1/30/09 WashingtonFirst Bank (Reston, VA)2 Pref. Stock w/ Ex. Warr. $6,633,000 $105,446
2/6/09 Alaska Pacific Bancshares, Inc. (Juneau, AK) Pref. Stock w/ Warr. $4,781,000 $4.05 $3 $4.08 175,772 175,772 $(0.03) $65,739
2/6/09 Banner County Ban Corporation (Harrisburg, Pref. Stock w/ Ex. Warr. $795,000 $11,921
NE)2
2/6/09 Carolina Trust Bank (Lincolnton, NC) Pref. Stock w/ Warr. $4,000,000 $7.24 $11 $6.90 86,957 86,957 $0.34 $55,000
2/6/09 CedarStone Bank (Lebanon, TN)2 Pref. Stock w/ Ex. Warr. $3,564,000 $53,411
2/6/09 Centrix Bank & Trust (Bedford, NH)2 Pref. Stock w/ Ex. Warr. $7,500,000 $112,406
2/6/09 Citizens Commerce Bancshares, Inc. Pref. Stock w/ Ex. Warr. $6,300,000 $94,421
(Versailles, KY)2
2/6/09 Community Holding Company of Florida, Inc. Pref. Stock w/ Ex. Warr. $1,050,000 $15,676
(Miramar Beach, FL)2
2/6/09 F & M Financial Corporation (Salisbury, NC)2 Pref. Stock w/ Ex. Warr. $17,000,000 $254,788
2/6/09 First Bank of Charleston, Inc. (Charleston, Pref. Stock w/ Ex. Warr. $3,345,000 $50,127
WV)2
2/6/09 First Express of Nebraska, Inc. (Gering, NE)2 Pref. Stock w/ Ex. Warr. $5,000,000 $74,938
2/6/09 First Market Bank, FSB (Richmond, VA)2 Pref. Stock w/ Ex. Warr. $33,900,000 $508,076
2/6/09 First Western Financial, Inc. (Denver, CO)2 Pref. Stock w/ Ex. Warr. $8,559,000 $128,279
2/6/09 Georgia Commerce Bancshares, Inc. Pref. Stock w/ Ex. Warr. $8,700,000 $130,391
(Atlanta, GA)2
2
2/6/09 Hyperion Bank (Philadelphia, PA) Pref. Stock w/ Ex. Warr. $1,552,000 $23,271
2/6/09 Lakeland Bancorp, Inc. (Oak Ridge, NJ) Pref. Stock w/ Warr. $59,000,000 $8.99 $212 $9.32 949,571 949,571 $(0.33) $811,250
2/6/09 Liberty Financial Services, Inc. (New Orleans, Pref. Stock $5,645,000 $77,619
LA)3
2/6/09 Lone Star Bank (Houston, TX)2 Pref. Stock w/ Ex. Warr. $3,072,000
2/6/09 Mercantile Capital Corp. (Boston, MA)2 Pref. Stock w/ Ex. Warr. $3,500,000 $52,456
2/6/09 MidWestOne Financial Group, Inc. (Iowa Pref. Stock w/ Warr. $16,000,000 $7.81 $67 $12.08 198,675 198,675 $(4.27) $220,000
City, IA)
2/6/09 Monarch Community Bancorp, Inc. Pref. Stock w/ Warr. $6,785,000 $6.10 $12 $3.90 260,962 260,962 $2.20 $93,294
(Coldwater, MI)
2
2/6/09 Pascack Community Bank (Westwood, NJ) Pref. Stock w/ Ex. Warr. $3,756,000 $56,298
2/6/09 PGB Holdings, Inc. (Chicago, IL)3 Pref. Stock $3,000,000 $41,250
2/6/09 Stockmens Financial Corporation (Rapid Pref. Stock w/ Ex. Warr. $15,568,000 $233,316
City, SD)2
2/6/09 The Bank of Currituck (Moyock, NC)2 Pref. Stock w/ Ex. Warr. $4,021,000 $60,264
2/6/09 The First Bancshares, Inc. (Hattiesburg, MS) Pref. Stock w/ Warr. $5,000,000 $7.50 $22 $13.71 54,705 54,705 $(6.21) $68,750
2/6/09 The Freeport State Bank (Harper, KS)2 Pref. Stock w/ Ex. Warr. $301,000 $4,510
2/6/09 Todd Bancshares, Inc. (Hopkinsville, KY)2 Pref. Stock w/ Ex. Warr. $4,000,000 $59,950
2/6/09 US Metro Bank (Garden Grove, CA)2 Pref. Stock w/ Ex. Warr. $2,861,000 $42,878
2/13/09 1st Enterprise Bank (Los Angeles, CA)2 Pref. Stock w/ Ex. Warr. $4,400,000 $61,282
2/13/09 BankGreenville (Greenville, SC)2 Pref. Stock w/ Ex. Warr. $1,000,000 $13,928
2/13/09 Bern Bancshares, Inc. (Bern, KS)2 Pref. Stock w/ Ex. Warr. $985,000 $13,736
2/13/09 Carrollton Bancorp (Baltimore, MD) Pref. Stock w/ Warr. $9,201,000 $5.56 $14 $6.72 205,379 205,379 $(1.16) $117,568
2/13/09 ColoEast Bankshares, Inc. (Lamar, CO)2 Pref. Stock w/ Ex. Warr. $10,000,000 $139,278
2/13/09 Corning Savings and Loan Association Pref. Stock w/ Ex. Warr. $638,000 $8,888
(Corning, AR)2
2/13/09 DeSoto County Bank (Horn Lake, MS)2 Pref. Stock w/ Ex. Warr. $1,173,000 $16,345
2/13/09 F&M Financial Corporation (Clarksville, TN)2 Pref. Stock w/ Ex. Warr. $17,243,000 $240,153
2/13/09 Financial Security Corporation (Basin, WY)2 Pref. Stock w/ Ex. Warr. $5,000,000 $69,639
2/13/09 First Choice Bank (Cerritos, CA)2 Pref. Stock w/ Ex. Warr. $2,200,000 $30,641
2/13/09 First Menasha Bancshares, Inc. (Neenah, WI)2 Pref. Stock w/ Ex. Warr. $4,797,000 $66,815
211
212
2/13/09 FNB United Corp. (Asheboro, NC) Pref. Stock w/ Warr. $51,500,000 $2.48 $28 $3.50 2,207,143 2,207,143 $(1.02) $658,055
2/13/09 Gregg Bancshares, Inc. (Ozark, MO)2 Pref. Stock w/ Ex. Warr. $825,000 $11,485
2/13/09 Hometown Bancshares, Inc. (Corbin, KY)2 Pref. Stock w/ Ex. Warr. $1,900,000 $26,463
2/13/09 Liberty Bancshares, Inc. (Springfield, MO)2 Pref. Stock w/ Ex. Warr. $21,900,000 $305,018
2/13/09 Meridian Bank (Devon, PA)2 Pref. Stock w/ Ex. Warr. $6,200,000 $86,352
2/13/09 Midwest Regional Bancorp, Inc. (Festus, MO)2 Pref. Stock w/ Ex. Warr. $700,000 $9,749
2/13/09 Northwest Bancorporation, Inc. (Spokane, WA)2 Pref. Stock w/ Ex. Warr. $10,500,000 $146,242
2/13/09 Northwest Commercial Bank (Lakewood, WA)2 Pref. Stock w/ Ex. Warr. $1,992,000 $27,753
2/13/09 Peoples Bancorp (Lynden, WA)2 Pref. Stock w/ Ex. Warr. $18,000,000 $250,700
2/13/09 PremierWest Bancorp (Medford, OR) Pref. Stock w/ Warr. $41,400,000 $3.39 $84 $5.70 1,038,462 1,090,385 $(2.31) $529,000
2/13/09 QCR Holdings, Inc. (Moline, IL) Pref. Stock w/ Warr. $38,237,000 $10.00 $45 $10.99 521,888 521,888 $(0.99) $488,584
2/13/09 Regional Bankshares, Inc .(Hartsville, SC)2 Pref. Stock w/ Ex. Warr. $1,500,000 $20,892
2/13/09 Reliance Bancshares, Inc. (Frontenac, MO)2 Pref. Stock w/ Ex. Warr. $40,000,000 $557,111
2/13/09 Santa Clara Valley Bank, N.A. (Santa Paula, Pref. Stock w/ Ex. Warr. $2,900,000 $40,391
CA)2
2/13/09 Security Bancshares of Pulaski County, Inc. Pref. Stock w/ Ex. Warr. $2,152,000 $29,982
(Waynesville, MO)2
2/13/09 State Capital Corporation (Greenwood, MS)2 Pref. Stock w/ Ex. Warr. $15,000,000 $208,917
2/13/09 The Bank of Kentucky Financial Corporation Pref. Stock w/ Warr. $34,000,000 $28.00 $157 $18.56 274,784 274,784 $9.44 $434,444
(Crestview Hills, KY)
2/13/09 Westamerica Bancorporation (San Rafael, CA) Pref. Stock w/ Warr. $83,726,000 $49.61 $1,448 $50.92 246,640 246,640 $(1.31) $1,069,832
2/20/09 BancPlus Corporation (Ridgeland, MS)2 Pref. Stock w/ Ex. Warr. $48,000,000 $617,666
2/20/09 CBB Bancorp (Cartersville, GA)2 Pref. Stock w/ Ex. Warr. $2,644,000 $34,019
2/20/09 Central Community Corporation (Temple, TX)2 Pref. Stock w/ Ex. Warr. $22,000,000 $283,097
2/20/09 Crazy Woman Creek Bancorp, Inc. (Buffalo, Pref. Stock w/ Ex. Warr. $3,100,000 $39,891
WY)2
2/20/09 First BancTrust Corporation (Paris, IL)2 Pref. Stock w/ Ex. Warr. $7,350,000 $94,591
2/20/09 First Merchants Corporation (Muncie, IN) Pref. Stock w/ Warr. $116,000,000 $8.03 $169 $17.55 991,453 991,453 $(9.52) $1,369,444
2/20/09 First Priority Financial Corp. (Malvern, PA)2 Pref. Stock w/ Ex. Warr. $4,579,000 $58,924
2/20/09 Florida Business BancGroup, Inc. (Tampa, FL)2 Pref. Stock w/ Ex. Warr. $9,495,000 $122,188
2/20/09 Guaranty Bancorp, Inc. (Woodsville, NH)2 Pref. Stock w/ Ex. Warr. $6,920,000 $89,047
2/20/09 Hamilton State Bancshares (Hoschton, GA)2 Pref. Stock w/ Ex. Warr. $7,000,000 $90,077
2/20/09 Hometown Bancorp of Alabama, Inc. Pref. Stock w/ Ex. Warr. $3,250,000 $41,832
(Oneonta, AL)2
2/20/09 Lafayette Bancorp, Inc. (Oxford, MS)2 Pref. Stock w/ Ex. Warr. $1,998,000 $25,712
2/20/09 Liberty Shares, Inc. (Hinesville, GA)2 Pref. Stock w/ Ex. Warr. $17,280,000 $222,360
2/20/09 Market Bancorporation, Inc. (New Market, MN)2 Pref. Stock w/ Ex. Warr. $2,060,000 $26,508
2/20/09 Mid-Wisconsin Financial Services, Inc. Pref. Stock w/ Ex. Warr. $10,000,000 $128,681
(Medford, WI)2
2/20/09 Northern States Financial Corporation Pref. Stock w/ Warr. $17,211,000 $5.33 $22 $4.42 584,084 584,084 $0.91 $203,185
(Waukegan, IL)
2/20/09 Premier Service Bank (Riverside, CA)2 Pref. Stock w/ Ex. Warr. $4,000,000
2/20/09 Royal Bancshares of Pennsylvania, Inc. Pref. Stock w/ Warr. $30,407,000 $1.87 $25 $4.13 1,104,370 1,104,370 $(2.26) $358,971
(Narberth, PA)
2/20/09 Security State Bancshares, Inc.(Charleston, Pref. Stock w/ Ex. Warr. $12,500,000 $160,850
MO)2
2/20/09 Sonoma Valley Bancorp (Sonoma , CA)2 Pref. Stock w/ Ex. Warr. $8,653,000 $111,354
2/20/09 The Private Bank of California (Los Angeles, Pref. Stock w/ Ex. Warr. $5,450,000 $70,142
CA)2
2/20/09 United American Bank (San Mateo, CA)2 Pref. Stock w/ Ex. Warr. $8,700,000

2/20/09 White River Bancshares Company Pref. Stock w/ Ex. Warr. $16,800,000 $216,183
(Fayetteville, AR)2
2
2/27/09 Avenue Financial Holdings, Inc. (Nashville, TN) Pref. Stock w/ Ex. Warr. $7,400,000 $87,382
2/27/09 BNC Financial Group, Inc. (New Canaan, CT)2 Pref. Stock w/ Ex. Warr. $4,797,000 $56,647
2/27/09 California Bank of Commerce (Lafayette, CA)2 Pref. Stock w/ Ex. Warr. $4,000,000 $47,233
2/27/09 Catskill Hudson Bancorp, Inc (Rock Hill, NY)2 Pref. Stock w/ Ex. Warr. $3,000,000 $35,425
2/27/09 Central Bancorp, Inc. (Garland, TX)2 Pref. Stock w/ Ex. Warr. $22,500,000 $265,688
2/27/09 Columbine Capital Corp. (Buena Vista, CO)2 Pref. Stock w/ Ex. Warr. $2,260,000 $26,687
2/27/09 Community Business Bank (West Pref. Stock w/ Ex. Warr. $3,976,000 $46,954
Sacramento, CA)2
2
2/27/09 Community First Inc. (Columbia, TN) Pref. Stock w/ Ex. Warr. $17,806,000 $210,253
2/27/09 D.L. Evans Bancorp (Burley, ID)2 Pref. Stock w/ Ex. Warr. $19,891,000 $234,889
2/27/09 First Gothenburg Bancshares, Inc. Pref. Stock w/ Ex. Warr. $7,570,000 $89,399
(Gothenburg, NE)2
2/27/09 First M&F Corporation (Kosciusko, MS) Pref. Stock w/ Warr. $30,000,000 $4.07 $37 $8.77 513,113 513,113 $(4.70) $325,000
2/27/09 First State Bank of Mobeetie (Mobeetie, TX)2 Pref. Stock w/ Ex. Warr. $731,000 $8,641
2/27/09 FNB Bancorp (South San Francisco, CA)2 Pref. Stock w/ Ex. Warr. $12,000,000 $141,700
2/27/09 Green Circle Investments, Inc. (Clive, IA)2 Pref. Stock w/ Ex. Warr. $2,400,000 $28,340
2/27/09 Green City Bancshares, Inc. (Green City, MO)2 Pref. Stock w/ Ex. Warr. $651,000 $7,696
2/27/09 Howard Bancorp, Inc. (Ellicott City, MD)2 Pref. Stock w/ Ex. Warr. $5,983,000 $70,646
2/27/09 Integra Bank Corporation (Evansville, IN) Pref. Stock w/ Warr. $83,586,000 $1.15 $24 $1.69 7,418,876 7,418,876 $(0.54) $905,515
2/27/09 Lakeland Financial Corporation (Warsaw, IN) Pref. Stock w/ Warr. $56,044,000 $19.00 $236 $21.20 396,538 396,538 $(2.20) $607,143
2/27/09 Medallion Bank (Salt Lake City, UT)2 Pref. Stock w/ Ex. Warr. $11,800,000 $139,338
2/27/09 Midtown Bank & Trust Company (Atlanta, GA)2 Pref. Stock w/ Ex. Warr. $5,222,000 $61,662
2/27/09 National Bancshares, Inc. (Bettendorf, IA)2 Pref. Stock w/ Ex. Warr. $24,664,000 $291,237
2/27/09 Private Bancorporation, Inc. (Minneapolis, MN)2 Pref. Stock w/ Ex. Warr. $4,960,000 $58,569
2/27/09 PSB Financial Corporation (Many, LA)2 Pref. Stock w/ Ex. Warr. $9,270,000 $109,473
2/27/09 Regent Capital Corporation (Nowata, OK)2 Pref. Stock w/ Ex. Warr. $2,655,000 $31,356
2/27/09 Ridgestone Financial Services, Inc. Pref. Stock w/ Ex. Warr. $10,900,000 $128,711
(Brookfield, WI)2
2/27/09 Southern First Bancshares, Inc. (Greenville, SC) Pref. Stock w/ Warr. $17,299,000 $6.99 $21 $7.85 330,554 330,554 $(0.86) $187,406
2/27/09 The Victory Bank (Limerick, PA)2 Pref. Stock w/ Ex. Warr. $541,000 $6,388
2/27/09 TriState Capital Holdings, Inc. (Pittsburgh, PA)2 Pref. Stock w/ Ex. Warr. $23,000,000 $271,592
3/6/09 AmeriBank Holding Company (Collinsville, OK)2 Pref. Stock w/ Ex. Warr. $2,492,000 $26,038
3/6/09 Blue Ridge Bancshares, Inc. (Independence, MO)2Pref. Stock w/ Ex. Warr. $12,000,000 $125,350
3/6/09 Blue River Bancshares, Inc. (Shelbyville, IN)2 Pref. Stock w/ Ex. Warr. $5,000,000 $52,230
3/6/09 BOH Holdings, Inc. (Houston, TX)2 Pref. Stock w/ Ex. Warr. $10,000,000 $104,458
3/6/09 Citizens Bancshares Corporation (Atlanta, GA)3 Pref. Stock $7,462,000 $71,511
3/6/09 Community Bancshares of Kansas, Inc. Pref. Stock w/ Ex. Warr. $500,000 $5,223
(Goff, KS)2
3/6/09 Farmers & Merchants Bancshares, Inc. Pref. Stock w/ Ex. Warr. $11,000,000 $114,905
(Houston, TX)2
3/6/09 First Busey Corporation (Urbana, IL) Pref. Stock w/ Warr. $100,000,000 $7.35 $263 $13.07 1,147,666 1,147,666 $(5.72) $958,333
3/6/09 First Federal Bancshares of Arkansas, Inc. Pref. Stock w/ Warr. $16,500,000 $3.93 $19 $7.69 321,847 321,847 $(3.76) $158,125
(Harrison, AR)
3/6/09 First Reliance Bancshares, Inc. (Florence, SC)2 Pref. Stock w/ Ex. Warr. $15,349,000 $160,326
3/6/09 First Southwest Bancorporation, Inc. Pref. Stock w/ Ex. Warr. $5,500,000 $57,452
(Alamosa, CO)2
3/6/09 First Texas BHC, Inc. (Fort Worth,TX)2 Pref. Stock w/ Ex. Warr. $13,533,000 $141,369
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214

3/6/09 Germantown Capital Corporation, Inc. Pref. Stock w/ Ex. Warr. $4,967,000 $51,878
(Germantown, TN)2
3/6/09 HCSB Financial Corporation (Loris, SC) Pref. Stock w/ Warr. $12,895,000 $12.60 $48 $21.09 91,714 91,714 $(8.49) $123,577
3/6/09 Highlands Independent Bancshares, Inc. Pref. Stock w/ Ex. Warr. $6,700,000 $69,987
(Sebring, FL)2
3/6/09 ICB Financial (Ontario, CA)2 Pref. Stock w/ Ex. Warr. $6,000,000 $62,675
3/6/09 Marine Bank & Trust Company (Vero Beach, FL)2 Pref. Stock w/ Ex. Warr. $3,000,000 $31,338
3/6/09 Merchants and Planters Bancshares, Inc. Pref. Stock w/ Ex. Warr. $1,881,000 $19,648
(Toone, TN)2
3/6/09 Park Bancorporation, Inc. (Madison, WI)2 Pref. Stock w/ Ex. Warr. $23,200,000 $242,343
3/6/09 PeoplesSouth Bancshares, Inc. (Colquitt, GA)2 Pref. Stock w/ Ex. Warr. $12,325,000 $128,741
3/6/09 Pinnacle Bank Holding Company, Inc. (Orange Pref. Stock w/ Ex. Warr. $4,389,000 $45,839
City, FL)2
3/6/09 Regent Bancorp, Inc. (Davie, FL)2 Pref. Stock w/ Ex. Warr. $9,982,000 $104,269
3/13/09 1st United Bancorp, Inc. (Boca Raton, FL)2 Pref. Stock w/ Ex. Warr. $10,000,000 $93,861
3/13/09 BancIndependent, Inc. (Sheffield, AL)2 Pref. Stock w/ Ex. Warr. $21,100,000 $198,047
3/13/09 Bank of George (Las Vegas, NV)2 Pref. Stock w/ Ex. Warr. $2,672,000 $25,086
3/13/09 Blackhawk Bancorp, Inc. (Beloit, WI)2 Pref. Stock w/ Ex. Warr. $10,000,000 $93,861
3/13/09 Butler Point, Inc. (Catlin, IL)2 Pref. Stock w/ Ex. Warr. $607,000 $5,692
3/13/09 Discover Financial Services (Riverwoods, IL) Pref. Stock w/ Warr. $1,224,558,000 $10.27 $4,947 $8.96 20,500,413 20,500,413 $1.31 $10,544,804
3/13/09 First American International Corp. (Brooklyn, Pref. Stock $17,000,000 $146,389
NY)3
2
3/13/09 First Intercontinental Bank (Doraville, GA) Pref. Stock w/ Ex. Warr. $6,398,000 $60,054
3/13/09 First National Corporation (Strasburg, VA)2 Pref. Stock w/ Ex. Warr. $13,900,000 $130,467
3/13/09 First Northern Community Bancorp (Dixon, CA) Pref. Stock w/ Warr. $17,390,000 $5.76 $52 $7.39 352,977 352,977 $(1.63) $149,747
3/13/09 First Place Financial Corp. (Warren, OH) Pref. Stock w/ Warr. $72,927,000 $3.11 $53 $2.98 3,670,822 3,670,822 $0.13 $627,982
3/13/09 Haviland Bancshares, Inc. (Haviland, KS)2 Pref. Stock w/ Ex. Warr. $425,000 $3,986
3/13/09 IBW Financial Corporation (Washington, DC)2 Pref. Stock w/ Ex. Warr. $6,000,000 $56,317
3/13/09 Madison Financial Corporation (Richmond, KY)2 Pref. Stock w/ Ex. Warr. $3,370,000 $31,639
3/13/09 Moneytree Corporation (Lenoir City, TN)2 Pref. Stock w/ Ex. Warr. $9,516,000 $89,321
3/13/09 Provident Community Bancshares, Inc. (Rock Pref. Stock w/ Warr. $9,266,000 $3.30 $6 $7.77 178,880 178,880 $(4.47) $79,791
Hill, SC)
3/13/09 Salisbury Bancorp, Inc. (Lakeville, CT) Pref. Stock w/ Warr. $8,816,000 $24.31 $41 $22.93 57,671 57,671 $1.38 $75,916
3/13/09 Sovereign Bancshares, Inc. (Dallas, TX)2 Pref. Stock w/ Ex. Warr. $18,215,000 $170,972
3/13/09 St. Johns Bancshares, Inc. (St. Louis, MO)2 Pref. Stock w/ Ex. Warr. $3,000,000 $28,158
3/20/09 Citizens Bank & Trust Company (Covington, LA)2 Pref. Stock w/ Ex. Warr. $2,400,000 $19,983
3/20/09 Community First Bancshares Inc. (Union Pref. Stock w/ Ex. Warr. $20,000,000 $166,528
City, TN)2
3/20/09 Farmers & Merchants Financial Corporation Pref. Stock w/ Ex. Warr. $442,000 $3,679
(Argonia, KS)2
2
3/20/09 Farmers State Bankshares, Inc. (Holton, KS) Pref. Stock w/ Ex. Warr. $700,000 $5,897
3/20/09 First Colebrook Bancorp, Inc. (Colebrook, NH)2 Pref. Stock w/ Ex. Warr. $4,500,000 $37,469
3/20/09 First NBC Bank Holding Company (New Pref. Stock w/ Ex. Warr. $17,836,000 $148,512
Orleans, LA)2
3/20/09 Heritage Oaks Bancorp (Paso Robles, CA) Pref. Stock w/ Warr. $21,000,000 $6.25 $48 $5.15 611,650 611,650 $1.10 $160,416
3/20/09 Kirksville Bancorp, Inc. (Kirksville, MO)2 Pref. Stock w/ Ex. Warr. $470,000 $3,920
3/20/09 Peoples Bancshares of TN, Inc (Madisonville, Pref. Stock w/ Ex. Warr. $3,900,000 $32,473
TN)2
3/20/09 Premier Bank Holding Company (Tallahassee, Pref. Stock w/ Ex. Warr. $9,500,000 $79,100
FL)2

3/27/09 Alpine Banks of Colorado (Glenwood Springs, Pref. Stock w/ Ex. Warr. $70,000,000 $508,666
CO)2
3/27/09 CBS Banc-Corp. (Russellville, AL)2 Pref. Stock w/ Ex. Warr. $24,300,000 $176,580
3/27/09 Clover Community Bankshares, Inc. (Clover, Pref. Stock w/ Ex. Warr. $3,000,000 $21,800
SC)2
3/27/09 Colonial American Bank (West Conshohocken, Pref. Stock w/ Ex. Warr. $574,000 $4,175
PA)2
3/27/09 CSRA Bank Corp. (Wrens, GA)2 Pref. Stock w/ Ex. Warr. $2,400,000 $17,440
3/27/09 IBT Bancorp, Inc. (Irving, TX)2 Pref. Stock w/ Ex. Warr. $2,295,000 $16,680
3/27/09 Maryland Financial Bank (Towson, MD)2 Pref. Stock w/ Ex. Warr. $1,700,000 $12,353
3/27/09 MS Financial, Inc. (Kingwood, TX)2 Pref. Stock w/ Ex. Warr. $7,723,000 $56,119
3/27/09 Naples Bancorp, Inc. (Naples, FL)2 Pref. Stock w/ Ex. Warr. $4,000,000 $29,067
3/27/09 Pathway Bancorp (Cairo, NE)2 Pref. Stock w/ Ex. Warr. $3,727,000 $27,079
3/27/09 SBT Bancorp, Inc. (Simsbury, CT)2 Pref. Stock w/ Ex. Warr. $4,000,000 $29,067
3/27/09 Spirit BankCorp, Inc. (Bristow, OK)2 Pref. Stock w/ Ex. Warr. $30,000,000 $218,000
3/27/09 Triad Bancorp, Inc. (Frontenac, MO)2 Pref. Stock w/ Ex. Warr. $3,700,000 $26,887
3/27/09 Trinity Capital Corporation (Los Alamos, NM)2 Pref. Stock w/ Ex. Warr. $35,539,000 $258,251
4/3/09 BancStar, Inc. (Festus, MO)2 Pref. Stock w/ Ex. Warr. $8,600,000 $54,682
4/3/09 BCB Holding Company, Inc. (Theodore, AL)2 Pref. Stock w/ Ex. Warr. $1,706,000 $10,845
4/3/09 Community First Bancshares, Inc. (Harrison, Pref. Stock w/ Ex. Warr. $12,725,000 $80,907
AR)2
4/3/09 First Capital Bancorp, Inc. (Glen Ellen, VA) Pref. Stock w/ Warr. $10,958,000 $8.00 $24 $6.55 250,947 250,947 $1.45 $63,922
4/3/09 Fortune Financial Corporation (Arnold, MO)2 Pref. Stock w/ Ex. Warr. $3,100,000 $19,711
4/3/09 Millennium Bancorp, Inc. (Edwards, CO)2 Pref. Stock w/ Ex. Warr. $7,260,000 $46,162
4/3/09 Prairie Star Bancshares, Inc. (Olathe, KS)2 Pref. Stock w/ Ex. Warr. $2,800,000 $17,803
4/3/09 Titonka Bancshares, Inc (Titonka, IA)2 Pref. Stock w/ Ex. Warr. $2,117,000 $13,462
4/3/09 Tri-State Bank of Memphis (Memphis, TN)2, 3 Pref. Stock $2,795,000 $16,304
4/3/09 TriSummit Bank (Kingsport, TN)2 Pref. Stock w/ Ex. Warr. $2,765,000 $17,578
4/10/09 Capital Commerce Bancorp, Inc. (Milwaukee, Pref. Stock w/ Ex. Warr. $5,100,000 $27,023
WI)2
4/10/09 City National Bancshares Corporation Pref. Stock $9,439,000 $45,884

(Newark, NJ)3
4/10/09 First Business Bank, N.A. (San Diego, CA)2 Pref. Stock w/ Ex. Warr. $2,211,000 $11,719
4/10/09 Metropolitan Capital Bancorp, Inc. (Chicago, IL)2 Pref. Stock w/ Ex. Warr. $2,040,000 $10,810
4/10/09 SV Financial, Inc. (Sterling, IL)2 Pref. Stock w/ Ex. Warr. $4,000,000 $21,194
4/17/09 Bank of the Carolinas Corporation Pref. Stock w/ Warr. $13,179,000 $5.00 $19 $4.16 475,204 475,204 $0.84 $51,252
(Mocksville, NC)
4/17/09 BNB Financial Services Corporation (New Pref. Stock w/ Ex. Warr. $7,500,000 $31,792
York, NY)2
4/17/09 Omega Capital Corp. (Lakewood, CO)2 Pref. Stock w/ Ex. Warr. $2,816,000 $11,938
4/17/09 Patterson Bancshares, Inc (Patterson, LA)2 Pref. Stock w/ Ex. Warr. $3,690,000 $15,645
4/17/09 Penn Liberty Financial Corp. (Wayne, PA)2 Pref. Stock w/ Ex. Warr. $9,960,000 $42,219
4/17/09 Tifton Banking Company (Tifton, GA)2 Pref. Stock w/ Ex. Warr. $3,800,000 $16,108
4/24/09 Allied First Bancorp, Inc. (Oswego, IL)2 Pref. Stock w/ Ex. Warr. $3,652,000 $11,613
4/24/09 Birmingham Bloomfield Bancshares, Inc Pref. Stock w/ Ex. Warr. $1,635,000 $5,200
(Birmingham, MI)2
4/24/09 Business Bancshares, Inc. (Clayton,MO)2 Pref. Stock w/ Ex. Warr. $15,000,000 $47,688
4/24/09 Frontier Bancshares, Inc. (Austin,TX)8 Sub. Debent. w/ Ex. Warr. $3,000,000
4/24/09 Grand Capital Corporation (Tulsa,OK)2 Pref. Stock w/ Ex. Warr. $4,000,000 $12,717
215
216
4/24/09 Indiana Bank Corp. (Dana, IN)2 Pref. Stock w/ Ex. Warr. $1,312,000 $4,174
4/24/09 Mackinac Financial Corporation/mBank Pref. Stock w/ Warr. $11,000,000 $4.50 $15 $4.35 379,310 379,310 $0.15 $32,083
(Manistique, MI)
4/24/09 Oregon Bancorp, Inc. (Salem, OR)2 Pref. Stock w/ Ex. Warr. $3,216,000 $10,225
4/24/09 Peoples Bancorporation, Inc. (Easley, SC)2 Pref. Stock w/ Ex. Warr. $12,660,000 $40,248
4/24/09 Standard Bancshares, Inc. (Hickory Hills, IL)2 Pref. Stock w/ Ex. Warr. $60,000,000 $190,750
4/24/09 Vision Bank - Texas (Richardson, TX)2 Pref. Stock w/ Ex. Warr. $1,500,000 $4,769
4/24/09 York Traditions Bank (York, PA)2 Pref. Stock w/ Ex. Warr. $4,871,000 $15,488
5/1/09 CenterBank(Milford, OH)2 Pref. Stock w/ Ex. Warr. $2,250,000
5/1/09 Georgia Primary Bank(Atlanta, GA)2 Pref. Stock w/ Ex. Warr. $4,500,000
5/1/09 HPK Financial Corporation (Chicago, IL)2 Pref. Stock w/ Ex. Warr. $4,000,000
5/1/09 OSB Financial Services, Inc. (Orange, TX)8 Sub. Debent. w/ Ex. Warr. $6,100,000
5/1/09 Security State Bank Holding-Company Sub. Debent. w/ Ex. Warr. $10,750,000
(Jamestown, ND)8
5/1/09 Union Bank & Trust Company (Oxford, NC)2 Pref. Stock w/ Ex. Warr. $3,194,000
5/1/09 Village Bank and Trust Financial Corp Pref. Stock w/ Warr. $14,738,000 $4.70 $20 $4.43 499,029 499,029 $0.27
(Midlothian, VA)
5/8/09 Freeport Bancshares, Inc. (Freeport, IL)8 Sub. Debent. w/ Ex. Warr. $3,000,000
5/8/09 Gateway Bancshares, Inc. (Ringgold, GA)2 Pref. Stock w/ Ex. Warr. $6,000,000
5/8/09 Highlands State Bank (Vernon, NJ)2 Pref. Stock w/ Ex. Warr. $3,091,000
5/8/09 Investors Financial Corporation of Pettis Sub. Debent. w/ Ex. Warr. $4,000,000
County, Inc. (Sedalia, MO)8
5/8/09 One Georgia Bank (Atlanta, GA)2 Pref. Stock w/ Ex. Warr. $5,500,000
5/8/09 Premier Bancorp, Inc. (Wilmette, IL)3, 8 Sub. Debent. $6,784,000
5/8/09 Sword Financial Corporation (Horicon, WI)8 Sub. Debent. w/ Ex. Warr. $13,644,000
5/15/09 Boscobel Bancorp, In c(Boscobel, WI)8 Sub. Debent. w/ Ex. Warr. $5,586,000
5/15/09 Brogan Bankshares, Inc. (Kaukauna, WI)8 Sub. Debent. w/ Ex. Warr. $2,400,000
5/15/09 Community Financial Shares, Inc. (Glen Pref. Stock w/ Ex. Warr. $6,970,000
Ellyn, IL)2
5/15/09 Deerfield Financial Corporation (Deerfield, WI)8 Sub. Debent. w/ Ex. Warr. $2,639,000
5/15/09 First Community Bancshares, Inc (Overland Pref. Stock w/ Ex. Warr. $14,800,000
Park, KS)2
5/15/09 Foresight Financial Group, Inc. (Rockford, IL)2 Pref. Stock w/ Ex. Warr. $15,000,000
5/15/09 IBC Bancorp, Inc. (Chicago, IL)3, 8 Sub. Debent. $4,205,000
5/15/09 Market Street Bancshares, Inc. (Mt. Vernon, IL)8 Sub. Debent. w/ Ex. Warr. $20,300,000
5/15/09 Mercantile Bank Corporation (Grand Rapids, MI) Pref. Stock w/ Warr. $21,000,000 $3.30 $28 $5.11 616,438 616,438 $(1.81)
5/15/09 Northern State Bank (Closter, NJ)2 Pref. Stock w/ Ex. Warr. $1,341,000
5/15/09 Riverside Bancshares, Inc. (Little Rock, AR)8 Sub. Debent. w/ Ex. Warr. $1,100,000
5/15/09 Southern Heritage Bancshares, Inc. Pref. Stock w/ Ex. Warr. $4,862,000
(Cleveland, TN)2
5/15/09 Western Reserve Bancorp, Inc (Medina, OH)2 Pref. Stock w/ Ex. Warr. $4,700,000
5/15/09 Worthington Financial Holdings, Inc. Pref. Stock w/ Ex. Warr. $2,720,000
(Huntsville, AL)2
5/22/09 Blackridge Financial, Inc. (Fargo, ND)2 Pref. Stock w/ Ex. Warr. $5,000,000
5/22/09 Commonwealth Bancshares, Inc.(Louisville, KY)8 Sub. Debent. w/ Ex. Warr. $20,400,000
5/22/09 Diamond Bancorp, Inc. (Washington, MO)8 Sub. Debent. w/ Ex. Warr. $20,445,000
5/22/09 F & C Bancorp, Inc. (Holden, MO)8 Sub. Debent. w/ Ex. Warr. $2,993,000
5/22/09 First Advantage Bancshares Inc. (Coon Pref. Stock w/ Ex. Warr. $1,177,000
Rapids, MN)2

5/22/09 Fort Lee Federal Savings Bank (Fort Lee, NJ)2 Pref. Stock w/ Ex. Warr. $1,300,000
5/22/09 Franklin Bancorp, Inc. (Washington, MO)2 Pref. Stock w/ Ex. Warr. $5,097,000
5/22/09 Illinois State Bancorp, Inc. (Chicago, IL)2 Pref. Stock w/ Ex. Warr. $6,272,000
5/22/09 Premier Financial Corp (Dubuque, IA)8 Sub. Debent. w/ Ex. Warr. $6,349,000
5/22/09 The Landrum Company (Columbia, MO)2 Pref. Stock w/ Ex. Warr. $15,000,000
5/22/09 United Bank Corporation (Barnesville, GA)8 Sub. Debent. w/ Ex. Warr. $14,400,000
5/22/09 Universal Bancorp (Bloomfield, IN)2 Pref. Stock w/ Ex. Warr. $9,900,000
5/29/09 American Premier Bancorp (Arcadia ,CA)2 Pref. Stock w/ Ex. Warr. $1,800,000
5/29/09 CB Holding Corp. (Aledo, IL)2 Pref. Stock w/ Ex. Warr. $4,114,000
5/29/09 Chambers Bancshares, Inc. (Danville, AR)8 Sub. Debent. w/ Ex. Warr. $19,817,000
5/29/09 Citizens Bancshares Co. (Chillicothe, MO)2 Pref. Stock w/ Ex. Warr. $24,990,000
5/29/09 Community Bank Shares of Indiana, Inc. (New Pref. Stock w/ Warr. $19,468,000 $7.51 $24 $7.56 386,270 386,270 $(0.05)
Albany, IN)
8
5/29/09 Fidelity Bancorp, Inc (Baton Rouge, LA) Sub. Debent. w/ Ex. Warr. $3,942,000
5/29/09 Grand Mountain Bancshares, Inc. (Granby, Pref. Stock w/ Ex. Warr. $3,076,000
CO)2
2
5/29/09 Two Rivers Financial Group (Burlington, IA) Pref. Stock w/ Ex. Warr. $12,000,000
6/5/09 Covenant Financial Corporation (Clarksdale, MS)2 Pref. Stock w/ Ex. Warr. $5,000,000
6/5/09 First Trust Corporation (New Orleans, LA)8 Sub. Debent. w/ Ex. Warr. $17,969,000
6/5/09 OneFinancial Corporation (Little Rock, AR)8, 10 Sub. Debent. w/ Ex. Warr. $17,300,000
6/12/09 Berkshire Bancorp, Inc. (Wyomissing, PA)2 Pref. Stock w/ Ex. Warr. $2,892,000
6/12/09 Enterprise Financial Services Group, Inc. Pref. Stock w/ Ex. Warr. $4,000,000
(Allison Park, PA)2
6/12/09 First Financial Bancshares, Inc. (Lawrence, Sub. Debent. w/ Ex. Warr. $3,756,000
KS)8, 10
6/12/09 First Vernon Bancshares, Inc. (Vernon, AL)2, 10 Pref. Stock w/ Ex. Warr. $6,000,000
6/12/09 River Valley Bancorporation, Inc. (Wausau, WI)8 Sub. Debent. w/ Ex. Warr. $15,000,000
6/12/09 SouthFirst Bancshares, Inc. (Sylacauga, AL)2 Pref. Stock w/ Ex. Warr. $2,760,000
6/12/09 Virginia Company Bank (Newport News, VA)2, 10 Pref. Stock w/ Ex. Warr. $4,700,000
6/19/09 Biscayne Bancshares, Inc. (Coconut Grove, Sub. Debent. w/ Ex. Warr. $6,400,000
FL)8,10
6/19/09 Century Financial Services Corporation (Santa Sub. Debent. w/ Ex. Warr. $10,000,000
Fe, NM)8
6/19/09 Duke Financial Group, Inc. (Minneapolis, MN)8 Sub. Debent. w/ Ex. Warr. $12,000,000
6/19/09 Farmers Enterprises, Inc. (Great Bend, KS)8 Sub. Debent. w/ Ex. Warr. $12,000,000
6/19/09 Manhattan Bancshares, Inc. (Manhattan, IL)8 Sub. Debent. w/ Ex. Warr. $2,639,000
6/19/09 Merchants and Manufacturers Bank Pref. Stock w/ Ex. Warr. $3,510,000
Corporation (Joliet, IL)2
6/19/09 NEMO Bancshares Inc. (Madison, MO)8 Sub. Debent. w/ Ex. Warr. $2,330,000
6/19/09 RCB Financial Corporation (Rome, GA)2, 10 Pref. Stock w/ Ex. Warr. $8,900,000
6/19/09 Suburban Illinois Bancorp, Inc. (Elmhurst, IL)8 Sub. Debent. w/ Ex. Warr. $15,000,000
6/19/09 University Financial Corp, Inc. (St. Paul, MN)3, 8 Sub. Debent. $11,926,000
6/26/09 Alliance Bancshares, Inc. (Dalton, GA) Pref. Stock w/ Ex. Warr. $2,986,000
6/26/09 Alliance Financial Services Inc. (Saint Paul, Sub. Debent. w/ Ex. Warr. $12,000,000
MN)8
6/26/09 FC Holdings, Inc. (Houston, TX)2 Pref. Stock w/ Ex. Warr. $21,042,000
6/26/09 Fidelity Resources Company (Plano, TX)2 Pref. Stock w/ Ex. Warr. $3,000,000
6/26/09 First Alliance Bancshares, Inc. (Cordova, TN)2 Pref. Stock w/ Ex. Warr. $3,422,000
6/26/09 Fremont Bancorporation (Fremont, CA)8 Sub. Debent. w/ Ex. Warr. $35,000,000
217
218

6/26/09 Gold Canyon Bank (Gold Canyon, AZ)2,10 Pref. Stock w/ Ex. Warr. $1,607,000
6/26/09 Gulfstream Bancshares, Inc. (Stuart, FL)2 Pref. Stock w/ Ex. Warr. $7,500,000
6/26/09 Hartford Financial Services Group, Inc. Pref. Stock w/ Warr. $3,400,000,000 $11.87 $3,863 $9.79 52,093,973 52,093,973 $2.08
(Hartford, CT)
6/26/09 M&F Bancorp, Inc. (Durham, NC)2,3,10 Pref. Stock $11,735,000
6/26/09 Metropolitan Bank Group, Inc. (Chicago, IL)2 Pref. Stock w/ Ex. Warr. $71,526,000
6/26/09 NC Bancorp, Inc. (Chicago, IL)2 Pref. Stock w/ Ex. Warr. $6,880,000
6/26/09 Security Capital Corporation (Batesville, MS)2,10 Pref. Stock w/ Ex. Warr. $17,388,000
6/26/09 Signature Bancshares, Inc. (Dallas, TX)8 Sub. Debent. w/ Ex. Warr. $1,700,000
6/26/09 Stearns Financial Services, Inc.(St. Cloud, Sub. Debent. w/ Ex. Warr. $24,900,000
MN)8
6/26/09 Waukesha Bankshares, Inc. (Waukesha, WI)2,10 Pref. Stock w/ Ex. Warr. $5,625,000
Total Purchase Amount $203,193,201,000 Total Capital Repayment Amount: $70,124,589,000
Total Treasury CPP Investment Amount: $133,068,612,000

Notes: Numbers affected by rounding. Data as of 6/30/2009. Numbered notes taken from Treasury’s 7/2/2009 Transactions Report containing data as of 6/30/2009.
1
This transaction was included in previous Transaction Reports with Merrill Lynch & Co., Inc. listed as the qualifying institution and a 10/28/2008 transaction date, footnoted to indicate that settlement was deferred pending merger. The purchase of Merrill Lynch by Bank of America was completed on 1/1/2009, and
this transaction under the CPP was funded on 1/9/2009.
2
Privately-held qualified financial institution; Treasury received a warrant to purchase additional shares of preferred stock (unless the institution is a CDFI), which it exercised immediately.
3
To promote community development financial institutions (CDFIs), Treasury does not require warrants as part of its investment in certified CDFIs when the size of the investment is $50 million or less.
4
Repayment pursuant to Title VII, Section 7001(g) of the American Recovery and Reinvestment Act of 2009.
5
Redemption pursuant to a qualified equity offering.
6
This amount does not include accrued and unpaid dividends, which must be paid at the time of capital repayment.
7
The proceeds associated with the disposition of this investment do not include accrued and unpaid dividends.
8
Subchapter S corporation; Treasury received a warrant to purchase additional subordinated debentures (unless the institution is a CDFI), which it exercised immediately.
9
In its qualified equity offering, this institution raised more capital than Treasury’s original investment, therefore, the number of Treasury’s shares underlying the warrant was reduced by half.
10
This institution participated in the expansion of CPP for small banks.
11
Treasury has three separate investments in Citigroup Inc. (“Citigroup”) under CPP, TIP, and AGP for a total of $50 billion. On 6/9/2009, Treasury entered into an agreement with Citigroup to exchange up to $12.5 billion of Treasury’s investment in Fixed Rate Cumulative Perpetual Preferred Stock, Series H (CPP
Shares) “dollar for dollar” in Citigroup’s Private Exchange Offering. The closing of the Exchange is contingent on specified closing conditions, including regulatory approvals or waivers and the concurrent consummation of the other private shareholders’ exchange. Treasury will initially exchange the CPP shares for
Series M Common Stock Equivalent (“Interim Stock”) and a warrant to purchase shares of common stock. Series M automatically converts to common stock and the associated warrant terminates upon receipt of certain shareholder approvals.
12
As stated in Footnote 11, on 6/9/2009, Treasury entered into an agreement with Citigroup to exchange Treasury’s total investment. In addition to the conditions in Footnote 11, Treasury’s investment in Fixed Rate Cumulative Perpetual Preferred Stock, Series H (CPP Shares) will be exchanged “dollar for dollar” up
to $25 billion as a result of Citigroup’s Private and Public Exchange Offerings. The closing of the Public Exchange is contingent on specified closing conditions, including regulatory approvals or waivers and the concurrent consummation of the other public shareholders’ exchange. Treasury will initially exchange the
CPP shares for Series M Common Stock Equivalent (“Interim Stock”) and a warrant to purchase shares of common stock. Series M automatically converts to common stock and the associated warrant terminates upon receipt of certain shareholder approvals. If any CPP Shares remain following the Private and Public
Exchanges, Treasury will exchange those remaining CPP shares “dollar for dollar” for Trust Preferred Securities.
a
According to Treasury, “If a Share Dividend is declared on a common stock of a bank in which Treasury holds outstanding warrants, Treasury is entitled to additional warrants. The ‘Update’ netted is the amount of new warrant shares that have been received as a result of the corporate action.” Strike price and current
number of outstanding warrants reflect these updates.
b
Also according to Treasury, First Niagara Corporation, Iberiabank Corporation, and State Street Corporation executed Qualified Equity Offerings which “reduce the number of outstanding warrants held by Treasury.”
c
Treasury made two investments in SunTrust. Since the dividends could not be allocated between the transactions, they are presented with the first investment for purposes of this schedule.
d
According to Treasury, “Provident was purchase by M&T Bank (a public institution). Treasury is currently in the process of swapping the warrants issued by Provident for warrants issued by M&T Bank.”
e
When a warrant’s current market price rises above the strike price, it is considered “In the Money,” otherwise it is considered “Out of the Money.” For this table, the stock price and market capitalization are as of 6/30/2009. Negative number indicates “Out of the Money.”
Sources:
Treasury, Transactions Report, response to SIGTARP data call, 6/30/2009.
Treasury, Transactions Report, 7/2/2009, www.treas.gov, accessed 7/6/2009.
Market Data: Capital IQ, Inc. (a division of Standard & Poor’s), www.capitaliq.com, accessed 7/6/2009.
Yahoo Finance, http://finance.yahoo.com, accessed 7/7/2009.
Warrants data: Treasury, CPP Pipeline Report, response to SIGTARP data call, 6/30/2009.
Treasury, response to SIGTARP data call, 7/8/2009, Treasury, response to SIGTARP draft, 7/14/2009.
SSFI TRANSACTION DETAIL, AS OF 6/30/2009
Transaction Details Exchange Details Warrants and Market Data
Amount “In
Market the Money”
Capitalization as of Strike Price as Number of or “Out of the
Investment Investment Transaction Investment Investment Stock Price as 6/30/2009 Stated in the Warrants Money” as of Payment
Date Seller Description Amount Date Type Description Amount of 6/30/2009 (in millions) Agreements Received 6/30/2009b to Treasury
11/25/2008 AIGa (New York, NY) Preferred Stock w/ $40,000,000,000 4/17/2009 Exchange Preferred Stock $40,000,000,000 $23.20 $3,123 $50.00 2,689,938 ($26.80) -0-
Warrants w/ Warrants1
4/17/2009 AIGa (New York, NY)2,3 Preferred Stock w/ $29,835,000,000 $23.20 $3,123 $0.000020 150 $23.20 -0-
Warrants
Total: $69,835,000,000
1
On 4/17/2009, Treasury exchanged its Series D Fixed Rate Cumulative Preferred Shares for Series E Fixed Rate Non-Cumulative Preferred Shares with no change to Treasury’s initial investment amount. In addition, in order for AIG to fully redeem the Series E
Preferred Shares, it has an additional obligation to Treasury of $1,604,576,000 to reflect the cumulative unpaid dividends for the Series D Preferred Shares due to Treasury through and including the exchange date.
2
The investment price reflects Treasury’s commitment to invest up to $30 billion less a reduction of $165 million representing retention payments AIG Financial Products made to its employees in March 2009.
3
This transaction does not include AIG’s commitment fee of an additional $165 million scheduled to be paid from its operating income in three equal installments over the five-year life of the facility.
a
AIG executed a 1 for 20 reverse stock split on 6/30/2009, therefore the market data and warrant data reflects this adustment.
b
When a warrant’s current market price rises above the strike price, it is considered “In the Money,” otherwise it is considered “Out of the Money.”
Sources: Treasury, response to SIGTARP data call, 6/30/2009; Treasury, response to SIGTARP draft, 7/9/2009; Market Data: Treasury, response to SIGTARP draft, 7/14/2009; Capital IQ, Inc. (a division of Standard & Poor’s), www.capitaliq.com, accessed
7/6/2009.
TIP TRANSACTION DETAIL, AS OF 6/30/2009

Purchase Details Warrants and Market Data
Market Strike Price Amount “In the
Stock Capitalization as of as Stated Number of Money” or “Out
Transaction Investment Investment Price as of 6/30/2009 in the Warrants of the Money” as In or Out of Dividend Payment
a
Date Seller Type Description Amount 6/30/2009 (in millions) Agreements Received of 6/30/2009 a the Money? to Treasury
12/31/2008 Citigroup Inc. (New York, NY)1 Purchase Preferred $2.97 $16,315 $10.61 188,501,414 ($7.64) Out $600,000,000
Stock w/ $20,000,000,000
Warrants
1/16/2009 Bank of America Corporation Purchase Preferred $13.20 $104,544 $13.30 150,375,940 ($0.10) Out $528,888,889
(Charlotte, NC) Stock w/ $20,000,000,000
Warrants
Total: $40,000,000,000
1
Treasury has three separate investments in Citigroup Inc. (“Citigroup”) under CPP, TIP, and AGP for a total of $50 billion. On 6/9/2009, Treasury entered into an agreement with Citigroup to exchange all of Treasury’s investments. Following
the Private Exchange and the Public Exchange (see footnotes 11 and 12 in the CPP section), Treasury will exchange Fixed Rate Cumulative Perpetual Preferred Stock, Series I (TIP) “dollar for dollar” for Trust Preferred Securities.
a
Sources: Treasury, response to SIGTARP data call, 6/30/2009; Treasury, Transactions Report, 7/2/2009; Market Data: Capital IQ, Inc. (a division of Standard & Poor’s), www.capitaliq.com, accessed 7/6/2009.
AGP TRANSACTION DETAIL, AS OF 6/30/2009

Transaction Details Warrants and Market Data
Market Strike Price Amount “In the
Stock Capitalization as of as Stated Number of Money” or “Out
Price as of 6/30/2009 in the Warrants of the Money” as In or Out of Dividend Payment
Date Seller Investment Description Guarantee Limit 6/30/2009 (in millions) Agreements Received of 6/30/2009a the Money?a to Treasury
Second-Loss Guarantee on
1/16/2009 Citigroup Inc. (New York, NY)1 Asset Pool $5,000,000,000 $2.97 $16,315 $10.61 66,531,728 ($7.64) Out $107,573,333
Total: $5,000,000,000
1
Treasury has three separate investments in Citigroup Inc. (“Citigroup”) under CPP, TIP, and AGP for a total of $50 billion. On 6/9/2009, Treasury entered into an agreement with Citigroup to exchange all of Treasury’s investments. Fol-
lowing the Private Exchange and the Public Exchange (see Footnotes 11 and 12 in the CPP section), Treasury will exchange Fixed Rate Cumulative Perpetual Preferred Stock Series G (AGP), received as premium with the AGP agreement,
“dollar for dollar” for Trust Preferred Securities.
a
b
AGP transaction is a guarantee, not a purchase. Treasury received a premium including preferred stock and warrants as part of this transaction.
TALF TRANSACTION DETAIL, AS OF 6/30/2009

Date Seller Investment Description Investment Amount
3/3/2009 TALF LLC (New York, NY)1 Debt Obligation w/ Additional Note $20,000,000,000
Total $20,000,000,000
Note: Numbers affected by rounding. Data as of 6/30/2009. Numbered notes taken from Treasury’s
7/2/2009 Transactions Report containing data as of 6/30/2009.
1
The loan was funded through TALF LLC, a special purpose vehicle created by The Federal Reserve Bank
of New York. The amount of $20,000,000,000 represents the maximum loan amount. The loan will be
incrementally funded.
Source: Treasury, response to SIGTARP data call, 6/30/2009; Treasury, Transactions Report, 7/2/2009.
219
AIFP TRANSACTION DETAIL, AS OF 6/30/2009 220
Purchase Details Exchange Details Warrant and Market Data for Publicly Traded Companies Payments to Treasury
Market Amount “In
Capitaliza- Strike Price the Money”
Stock tion as of as Stated Number of or “Out of the
Transaction Investment Investment Transaction Investment Investment Price as of 6/30/2009 in the Warrants Money” as of In or Out of Dividend Interest Principal
Date Seller Type Description Amount Date Type Description Amount 6/30/2009 (in millions) Agreements Received 6/30/2009c the Money?c Paymenta Paymenta Paymenta
12/29/2008 GMAC LLC (Detroit, MI) Purchase Preferred Stock w/ $5,000,000,000 $159,611,111
Exercised Warrants
12/29/2008 General Motors Corporation Purchase Debt Obligation $884,024,131 5/29/2009 Exchange Equity Interest $884,024,131 $666 see note a
(Detroit, MI)1 in GMAC12
12/31/2008 General Motors Corporation Purchase Debt Obligation w/ $13,400,000,000 $1.09 $666 $3.47 122,035,597 ($2.38) Out $143,526,108
(Detroit, MI) Warrants and Ad-
ditional Note
1/2/2009 Chrysler Holding LLC Purchase Debt Obligation w/ $4,000,000,000 $52,152,222
(Auburn Hills, MI)14 Additional Note
1/16/2009 Chrysler Financial Services Purchase Debt Obligation w/ $1,500,000,000 $6,036,837 $130,802,971
Americas LLC Additional Note
(Farmington Hills, MI)2
4/22/2009 General Motors Corporation Purchase Debt Obligation w/ $2,000,000,000 $666
(Detroit, MI)3 Additional Note
4/29/2009 Chrysler Holding LLC Purchase Debt Obligation w/ $500,000,000
(Auburn Hills, MI)4,5 Additional Note
4/29/2009 Chrysler Holding LLC Purchase Debt Obligation w/ $280,130,642
(Auburn Hills, MI)4,6 Additional Note
5/1/2009 Chrysler LLC (Wilmington, DE)7 Purchase Debt Obligation w/ $3,043,143,000
Additional Note
5/20/2009 Chrysler LLC (Wilmington, DE)8 Purchase Debt Obligation w/ $756,857,000
Additional Note

(Detroit, MI)9 Additional Note see note a
5/21/2009 GMAC LLC (Detroit, MI) Purchase Preferred Stock w/ $7,500,000,000
Exercised Warrants
5/27/2009 New CarCo Acquisition LLC Purchase Debt Obligation w/ $6,642,000,000
(Wilmington, DE)10 Additional Note, Equity
Interest
5/27/2009 General Motors Corporation Purchase Debt Obligation w/ $360,624,198 $666
Total: $79,966,778,971
1
Treasury committed to lend General Motors Corporation up to $1,000,000,000. The ultimate level of funding was dependent upon the level of investor participation in GMAC LLC’s rights offering. The amount has been updated to reflect the final level of funding.
2
The loan was funded through Chrysler LB Receivables Trust, a special purpose vehicle created by Chrysler Financial. The amount of $1,500,000,000 represents the maximum loan amount. The loan will be incrementally funded.
3
This transaction is an amendment to Treasury’s 12/31/2008 agreement with General Motors Corporation, which brought the total loan amount to $15,400,000,000.
4
This transaction is an amendment to Treasury’s 1/2/2009 agreement with Chrysler Holding LLC, increasing the total loan amount to $4,780,130,642.
5
The loan may be incrementally funded.
6
The loan will be used to capitalize Chrysler Warranty SPV LLC, a special purpose vehicle created by Chrysler LLC.
7
The terms of this transaction, first reported based on a binding term sheet fully executed on 5/1/2009 but made effective as of 4/30/2009, are now finalized and reflected in a credit agreement fully executed on 5/5/2009. Under the terms of the credit agreement, all commitment amounts were adjusted as follows:
Treasury’s commitment amount is $3.04 billion of the total $4.1 billion debtor-in-possession (DIP) credit facility. The amount of $1.4 billion, of which Treasury’s share is $1.04 billion, is available in weekly disbursements under the terms of the Bankruptcy Court’s interim order approving the DIP credit facility; the balance will be
available in weekly disbursements after certain Bankruptcy Court milestones are met.
8
This transaction is an amendment to Treasury’s DIP credit agreement with Chrysler LLC dated 5/5/2009 and increases Treasury’s commitment to $3,800,000,000. The amendment was fully executed on 5/20/2009, but was made effective as of 5/15/2009.
9
This transaction is an amendment to Treasury’s 12/31/2008 agreement with General Motors Corporation, which brought the total loan amount to $19,400,000,000, including the 4/22/2009 amendment.
10
The terms of this transaction, first reported based on a term sheet fully executed on 5/27/2009 for an amount up to $6.943 billion, are now finalized and reflected in a credit agreement fully executed on 6/10/2009. Under the terms of the credit agreement, Treasury made a new commitment to New CarCo Acquisition
LLC (renamed Chrysler Group LLC on or about 6/10/2009) of up to $6.642 billion. The total loan amount is up to $7.142 billion including $500 million of debt assumed from Treasury’s 1/2/2009 credit agreement with Chrysler Holding LLC. The debt obligations will be secured by a first priority lien on the assets of New CarCo
Acquisition LLC (the company that purchased Chrysler LLC’s assets in a sale pursuant to section 363 of the Bankruptcy Code).
11
This transaction is an amendment to Treasury’s 12/31/2008 agreement with General Motors Corporation, which brings the total loan amount to $19,760,624,198, including the 4/22/2009 and 5/20/2009 amendments. The $360 million loan will be used to capitalize GM Warranty LLC, a special purpose vehicle created by
General Motors Corporation.
12
Pursuant to its rights under the loan agreement with General Motors Corporation (GM) reported on 12/29/2009, Treasury exchanged its $884 million loan to GM for a portion of GM’s common equity interest in GMAC LLC. As a result of the exchange, Treasury holds a 35.4% common equity interest in GMAC LLC.
13
Under the terms of the $33.3 billion debtor-in-possession (DIP) credit agreement, Treasury’s commitment amount is $30.1 billion. Up to $15 billion is available pursuant to the interim order the Bankruptcy Court entered approving the DIP credit facility, of which Treasury’s share is $12.8 billion; the balance will be available
shortly after the Bankruptcy Court’s final and non-appealable order approving the DIP credit facility.
14
Pursuant to the agreement originally reported on 5/27/2009 and fully executed on 6/10/2009 (explained in Footnote 10), $500 million of this deal’s debt will be assumed under that fully executed agreement.
a
The information provided by Treasury on principal, income, and dividends was not broken out by transaction. For purposes of this table, it is presented in aggregate under one transaction for each AIFP participant.
b
This table include AWCP transactions. See notes 6 and 11.
c
ASSP TRANSACTION DETAIL, AS OF 6/30/2009

Purchase Details
Date Seller Transaction Type Investment Description Investment Amount Interest Payment to Treasury
4/9/2009 GM Supplier Receivables LLC (Wilmington, DE)1 Purchase Debt Obligation w/ Additional Note $3,500,000,000 $114,521
4/9/2009 Chrysler Receivables SPV LLC (Wilmington, DE)2 Purchase Debt Obligation w/ Additional Note $1,500,000,000 $594,349
Total: $5,000,000,000
Note: Numbers affected by rounding. Data as of 6/30/2009. Numbered notes taken from Treasury’s 7/2/2009 Transactions Report containing data as of 6/30/2009.
1
The loan was funded through GM Supplier Receivables, LLC, a special purpose vehicle created by General Motors Corporation. The amount of $3,500,000,000 represents the maximum
loan amount. The loan will be incrementally funded. The agreement was fully executed on 4/9/2009, but was made effective as of 4/3/2009.
2
The loan was funded through Chrysler Receivables SPV LLC, a special purpose vehicle created by Chrysler LLC. The amount of $1,500,000,000 represents the maximum loan amount. The
loan will be incrementally funded. The agreement was fully executed on 4/9/2009, but was made effective as of 4/7/2009.
HAMP TRANSACTION DETAIL, AS OF 6/30/2009
Cap of Incentive
Servicer Modifying Borrowers’ Loans Payments on Behalf Adjustment Details Market
of Borrowers and to Capitalization as of
Transaction Servicers & Lenders/ Cap Adjustment 6/30/2009
Date Name of Institution Investment Description Investors (Cap)1 Adjustment Date Amount Adjusted Cap Reason for Adjustment (in millions)
4/13/2009 Select Portfolio Servicing Financial Instrument for $376,000,000 6/12/2009 $284,590,000 $660,590,000 Updated portfolio data
(Salt Lake City, UT) Home Loan Modifications from servicer
4/13/2009 CitiMortgage, Inc. (O’Fallon, MO) Financial Instrument for $2,071,000,000 6/12/2009 $(991,580,000) $1,079,420,000 Updated portfolio data
Home Loan Modifications from servicer
4/13/2009 Wells Fargo Bank, NA (Des Financial Instrument for $2,873,000,000 6/17/2009 $(462,990,000) $2,410,010,000 Updated portfolio data $114,141
Moines, IA) Home Loan Modifications from servicer
4/13/2009 GMAC Mortgage, Inc. (Ft. Wash- Financial Instrument for $633,000,000 6/12/2009 $384,650,000 $1,017,650,000 Updated portfolio data
ington, PA) Home Loan Modifications from servicer
4/13/2009 Saxon Mortgage Services, Inc. Financial Instrument for $407,000,000 6/17/2009 $225,040,000 $632,040,000 Updated portfolio data
(Irving, TX) Home Loan Modifications from servicer
4/13/2009 Chase Home Finance, LLC Financial Instrument for $3,552,000,000
(Iselin, NJ) Home Loan Modifications
4/16/2009 Ocwen Financial Corporation, Inc. Financial Instrument for $659,000,000 6/12/2009 $(105,620,000) $553,380,000 Updated portfolio data $875
(West Palm Beach, FL) Home Loan Modifications from servicer
4/17/2009 Bank of America, N.A. (Simi Financial Instrument for $798,900,000 6/12/2009 $5,540,000 $804,440,000 Updated portfolio data $104,544
Valley, CA) Home Loan Modifications from servicer
4/17/2009 Countrywide Home Loans Financial Instrument for $1,864,000,000 6/12/2009 $3,318,840,000 $5,182,840,000 Updated portfolio data
Servicing LP (Simi Valley, CA) Home Loan Modifications from servicer
4/20/2009 Home Loan Services, Inc. Financial Instrument for $319,000,000 6/12/2009 $128,300,000 $447,300,000 Updated portfolio data
(Pittsburgh, PA) Home Loan Modifications from servicer
4/20/2009 Wilshire Credit Corporation Financial Instrument for $366,000,000 6/12/2009 $87,130,000 $453,130,000 Updated portfolio data
(Beaverton, OR) Home Loan Modifications from servicer
4/24/2009 Green Tree Servicing LLC Financial Instrument for $156,000,000 6/17/2009 $(64,990,000) $91,010,000 Updated portfolio data
(Saint Paul, MN) Home Loan Modifications from servicer
4/27/2009 Carrington Mortgage Services, Financial Instrument for $195,000,000 6/17/2009 $(63,980,000) $131,020,000 Updated portfolio data
LLC (Santa Ana, CA) Home Loan Modifications from servicer
5/1/2009 Aurora Loan Services, LLC Financial Instrument for $798,000,000 6/17/2009 $(338,450,000) $459,550,000 Updated portfolio data
(Littleton, CO) Home Loan Modifications from servicer
5/28/2009 Nationstar Mortgage LLC Financial Instrument for $101,000,000 6/12/2009 $16,140,000 $117,140,000 Updated portfolio data
(Lewisville, TX) Home Loan Modifications from servicer
6/12/2009 Residential Credit Solutions Financial Instrument for $19,400,000
(Fort Worth, TX) Home Loan Modifications
6/17/2009 CCO Mortgage (Glen Allen, VA) Financial Instrument for $16,520,000
Home Loan Modifications
6/17/2009 RG Mortgage Corporation Financial Instrument for $57,000,000
(San Juan, PR) Home Loan Modifications
6/19/2009 First Federal Savings and Loan Financial Instrument for $770,000
(Port Angeles, WA) Home Loan Modifications
6/19/2009 Wescom Central Credit Union Financial Instrument for $540,000
(Anaheim, CA) Home Loan Modifications
6/26/2009 Citizens First Wholesale Mortgage Financial Instrument for $30,000
Company (The Villages, FL) Home Loan Modifications
6/26/2009 Technology Credit Union (San Financial Instrument for $70,000
Jose, CA) Home Loan Modifications
6/26/2009 National City Bank Financial Instrument for $294,980,000
(Miamisburg, OH) Home Loan Modifications
Total Initial Cap: $15,558,210,000 Total Cap Adjustments: $2,422,620,000
TOTAL CAP: $17,980,830,000
Notes: Numbers affected by rounding. Data as of 6/30/2009. Numbered note taken from Treasury’s 7/2/2009 Transactions Report containing data as of 6/30/2009.
1
The Cap of Incentive Payments represents the potential total amount allocated to each servicer and includes the maximum amount allotted for all payments on behalf of borrowers and payments to servicers and lenders/
investors. The Cap is subject to adjustment based on the total amount allocated to the program and individual servicer usage for borrower modifications. Each adjustment to the Cap is reflected under Adjustment Details.
Sources: Treasury, Transactions Report, response to SIGTARP data call, 6/30/2009; Market Data: Treasury, response to SIGTARP draft, 7/14/2009; Capital IQ, Inc. (a division of Standard & Poor’s), www.capitaliq.com,
accessed 7/15/2009.
221
222 APPENDIX G I CORRESPONDENCE REGARDING SIGTARP RECOMMENDATIONS I JULY 21, 2009
CORRESPONDENCE REGARDING SIGTARP RECOMMENDATIONS

This appendix provides copies of the following correspondence:
CORRESPONDENCE
Date From To Regarding
5/5/2009 Federal Reserve SIGTARP TALF Fraud Mitigation Factors
5/22/2009 Federal Reserve SIGTARP TALF Fraud Mitigation Factors
6/10/2009 SIGTARP Treasury PPIP Recommendations
6/19/2009 SIGTARP Treasury PPIP Recommendations
Response to SIGTARP’s 6/10/2009 and
7/2/2009 Treasury SIGTARP
6/19/2009 PPIP Recommendations
Response to recommendations contained in
SIGTARP’s April Quarterly Report
Additional response to SIGTARP
recommendations
CORRESPONDENCE REGARDING SIGTARP RECOMMENDATIONS I APPENDIX G I JULY 21, 2009 223
ORGANIZATIONAL CHART I APPENDIX H I JULY 21, 2009 257
ORGANIZATIONAL CHART
Special Inspector General

Neil Barofsky
Deputy Special
Inspector General
Kevin Puvalowski
Acting Chief of Staff Chief Counsel

Kevin Puvalowski Bryan Saddler
Deputy Chief Communications Director of

of Staff Director Congressional Affairs
Cathy Alix Kristine Belisle Lori Hayman
Deputy SIG– Deputy SIG– Deputy SIG–

Investigations Audit Operations
Chris Sharpley Barry Holman Dr. Eileen Ennis
Chief Investigative Special Agent

Desk Officer -- SSA Director Director Principal ADSIG ADSIG -- HR ADSIG -- CFO/CIO
Counsel in Charge
Paul Conlon Mike Kennedy Jim Shafer Lynn Perkoski Deborah Mason **AJ Germek
Richard Rosenfeld Scott Rebein
Hotline Supervisor
Attorney Advisors Investigators Auditors Auditors
Minh-Tu Nguyen
Analysts
Note: SIGTARP organizational chart as of 6/30/2009.
**Detailee
SIGTARP: Quarterly Report to Congress | July 21, 2009
CT
INSPE OR GE
AL N
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SP
A L
TRO
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ASS PR
E T R ELIEF
SIGTARP
SIG-QR-09-03
Q3
2009
SIGTARP Office of the Special Inspector General
Advancing Economic Stability Through Transparency, Coordinated Oversight and Robust Enforcement
202.622.1419
Hotline: 877.SIG.2009 Quarterly Report to Congress
SIGTARP@do.treas.gov July 21, 2009
www.SIGTARP.gov

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SIGTARP: Quarterly Report to Congress | July 21, 2009

Office of the Special Inspector General

*Visit www.sigtarp.gov to view Appendix A: Glossary, Appendix B: Acronyms and Abbreviations,

TARP IN FOCUS, AND IN CONTEXT

TOTAL POTENTIAL FUNDS SUBJECT TO SIGTARP OVERSIGHT, AS OF 6/30/2009 ($ BILLIONS)

Total Projected Projected TARP

OVERSIGHT ACTIVITIES OF SIGTARP

More than 50% of SIGTARP’s ongoing investigations were developed in whole

Systemically Significant Failing Institutions program, the Automotive Industry

SIGTARP’S RECOMMENDATIONS ON THE OPERATION OF TARP

Transparency in TARP Programs

• Use of Funds Generally: One of SIGTARP’s first recommendations was

Although SIGTARP understands Treasury’s need to balance the public’s trans-

Imposition of Information Barriers, or “Walls,” in PPIP

• Section 1 describes the activities of SIGTARP.

SIGTARP’S CREATION AND STATUTORY AUTHORITY

• provides SIGTARP the authority, with limited exceptions, to conduct, supervise,

• impose, in consultation with SIGTARP, strict conflicts-of-interest rules on

As discussed later in this section and in detail in Section 5 of this report,

Fraud Enforcement Recovery Act

Providing Advice on Compliance and Fraud Prevention

• SIGTARP personnel generally receive briefings concerning each new TARP

SIGTARP Audit Activity

• ensure transparency in TARP programs to the fullest reasonable extent to foster

SIGTARP’s First Completed Audit: Use of Funds

Audits Nearing Completion

• Executive Compensation Compliance: This audit, also based on SIGTARP’s

employees in March 2009, including the extent of knowledge and oversight of

New Audits Underway or Planned

SIGTARP Investigations Activity

Felony Charges Against Gordon Grigg

Supporting FTC’s Action Enjoining Improper Use of

“MakingHomeAffordable.gov” or any other domain name containing “.gov.”

TALF-PPIP Task Force

Coordination with Law Enforcement Agencies

• SIGTARP continues to coordinate with more than a dozen States Attorneys

Coordination with Other EESA Oversight Bodies

• bi-weekly conference calls with staff from FSOB

• The Special Inspector General

Communications with Congress

BUILDING SIGTARP’S ORGANIZATION

SIGTARP’s Physical and Technical Infrastructure

FINANCIAL OVERVIEW OF TARP

• Financial Institution Support Programs — These programs share a common,

Financial Institution Support Programs

Asset Support Programs

• Term Asset-Backed Securities Loan Facility (“TALF”). TALF was originally

Automotive Industry Support Programs

• Automotive Industry Financing Program (“AIFP”). Under this program,

Homeowner Support Programs

• Making Home Affordable (“MHA”) Program. According to Treasury, MHA

Notes: Numbers affected by rounding. As of 6/30/2009, funding for

Sources: See final endnote.

TOTAL POTENTIAL FUNDS SUBJECT TO SIGTARP OVERSIGHT, AS OF 6/30/2009 ($ BILLIONS)

Total Projected Projected TARP

Notes: Numbers affected by rounding.

EXPENDITURE LEVELS BY PROGRAM, AS OF 6/30/2009 ($ BILLIONS)

Amount Percent (%) Section Reference

Notes: Numbers affected by rounding.

FIGURE 2.2 FIGURE 2.4

CUMULATIVE EXPENDITURE AND EXPENDITURES BY PROGRAM, SNAPSHOT

Note: Numbers affected by rounding. Notes: Numbers affected by rounding.

Sources: Treasury, Transactions Report, 7/2/2009; Treasury, response to